176 • 100 GREAT BUSINESS IDEAS
Microfinance is the business of lending small sums of money to
entrepreneurs in the developing world, recognizing the ingenuity
and commercialism of some of the world’s poor.
The idea
Microfi nance works by loaning customers relatively small amounts
of capital (eg $50) at a commercial rate of interest. This leads to the
development of a product or to the realization of an idea. This loan is
typically made via a local bank—a group of people who administer
the scheme. This lending process stimulates a self-sustaining cycle
of wealth creation.
Initially, major banks and fi nancial service institutions, as well
as governments and NGOs, were skeptical. Times have changed,
and many organizations can now see the commercial, economic,
and humanitarian value of this activity. FINCA International has
supported this work and, together with others (such as Grameen
Bank in Bangladesh), has shown that microcredit works well. In
the view of Rupert Scofi eld, executive director of FINCA: “My hope
is that this type of program encourages people to be honest, treat
each other with respect, and succeed. What really matters is how
determined people are to succeed.”
Founded in 1984, FINCA (the Foundation for International
Community Assistance) is a non-profi t agency that pioneered
microfi nance—or “village banking.”