How Microfinance Works

Micro-enterprise development is based on sound economic theory, made possible through community banks called microfinance institutions (MFIs).

MFIs work on the same principles as credit unions. They are designed to bring maximum benefit to their customers, with their profits recycled into further loans. Each institution has an independent board who understands the needs and challenges of the community they’re working in.

Life for Theang Phally, a single mother of one, has improved dramatically since a small loan from VisionFund enabled her to open a grocery store from home. Photo by SovanarraWorld Vision Cambodia.

Microfinance is an integrated part of World Vision’s development work and is not a stand-alone programme. Potential loan recipients are first given business training to equip them with the basic skills required to successfully run a small business.

The resulting increase in small businesses, which may include livestock rearing, opening a shop or food stall, or many other initiatives meeting community needs has many advantages:

Employment increases - as the business expands, the owner can provide jobs for others in the community

Family income increases – families can afford to provide schooling and medical care for the children without outside intervention

Empowerment - especially for women and children. MED brings new opportunities for decision-making, education and community positioning

Sustainability - the success of the business continues long after the loan has been repaid, meaning greater family income for education, healthcare and a better life.

If you would like more information on how you could contribute to World Vision’s microfinance work, please contact us at 6221-1040 or email may.li@worldvision.org.sg