Many in the developed world aren’t very familiar with micro-financing. One of the only parallels would be something like cash advances, but they work a little differently. There’s a lot of debate on whether or not micro-financing is positive or just predatory. Either way, it has shown to be a powerful tool in helping developing countries build up their private sector and finally get out of poverty.

You don’t really need to be an expert economist in order to understand the concept behind micro-financing. It’s a basic premise that’s all based around helping poor people get out of oppressive poverty. These individuals are able to apply for small, low-interest loans so they can either improve their current situation and look for a better job, get an education, or start and operate their own business. In the end, the people borrowing this money are able to pay it back over a long period of time. These programs have become very popular in the developing world and have shown to empower poor people to get out of their current economic situation and improve their status.
Some have argued that these types of practices equate only to predatory lending, but as many other countries have shown, it’s more effective than other types of aid that are given to developing countries by non-profit organizations. As is often the case, when large organizations like the International Monetary Fund or the United Nations give large amounts of money to the government, the money rarely makes any real impact to the average citizen. This is because much of the money given to governments is largely spent on developing infrastructure, education, and other aid programs. It really doesn’t help people improve their status and acts much more like a trickle-down-effect.
Many have argued that these lending organizations are making money off of these lending programs but that’s only because so many people view them as a viable way to make the most impact in their life. Through these programs people are able to pull themselves out of debt and finally pay off their bills through access to larger lines of credit, or larger disposable incomes, and even prepaid cards (including perhaps, prepaid phone cards) and start their own business. Either way, it’s changing lives and even though some minor changes could be made to these lending programs, it’s much better than letting someone remain in poverty.