Financial Intermediation: The process of mobilizing deposits and disbursing them as loans to clients or investing them in other types of financial instruments.
Funder: An organization that provides monies to MFIs for operations.
Group Lending: Lending mechanism which allows a group of individuals – often called a solidarity group – to provide collateral or loan guarantee through a group repayment pledge. The incentive to repay the loan is based on peer pressure – if one group member defaults, the other group members make up the payment amount.
Individual Lending: Single-client lending where repayment relies solely on the individual.
Institutional Type: MFIs can be Bank; Cooperative/Credit Union; Non-Bank Financial Institution; Non-Profit (NGO); Rural Bank.
Microcredit: Another name for a micro-loan. A part of the field of microfinance, microcredit is the provision of credit services to low-income entrepreneurs.
Microfinance: Microfinance offers poor people access to basic financial services such as loans, savings, money transfer services and microinsurance.
Microfinance Institution: Also called MFI. An institution that provides financial services to the world’s poor. A financial institution can be a nonprofit organization, regulated financial institution or commercial bank that provides microfinance products and services to low-income clients.
Microinsurance: A system by which people, businesses and other organizations make payments to share risk. Access to insurance enables entrepreneurs to concentrate more on growing their businesses while mitigating other risks affecting property, health or the ability to work.
Microsavings: Savings in very small increments, frequently starting with just one USD and followed with very small deposits.
Remittance: Transfers of funds from people in one place to people in another, usually across borders to family and friends. Compared with other sources of money that can fluctuate depending on the political or economic climate, remittances are a relatively steady source of funds.
Savings Mobilization: Programs intending to mobilize the capital of the poor and to provide savings accounts, as well as credit services, to microentrepreneurs and low-income households.
Sustainability: An organization’s ability to cover costs. There are varying degrees of sustainability, ranging from not sustainable to financially sustainable.
Transformation: In a microfinance context, transformation refers to the process by which a nonprofit community organization or an NGO becomes a regulated financial institution.
Transparency: The degree of an MFI’s openness as determined by a sequence of financial and social performance information-gathering and testing. A transparent microfinance organization gathers and reports accurate financial information on its own, to be verified and analyzed by external parties. These external authorities ensure that the MFI’s performance complies with appropriate industry standards.
Unbanked: A term used to describe the world’s working poor who are not able to participate in the formal banking sectors.
Voluntary Savings: Deposits from the general public and members that are not maintained as a condition for accessing a current or future loan and are held with the institution.
