Microfinance: Breaking the cycle of poverty through economic development

What is microfinance?

Millions of low-income individuals who would like to set up a small business to support their families are often excluded from doing so because banks won't grant loans without collateral to borrow against or a credit history. World Vision's microfinance programme seeks to address this problem by providing small business loans (also known as microloans or microcredit) and other financial services that give these individuals the working capital they need to grow a business and work their way out of poverty. Once repaid, these loans are then recycled back into the programme to help other borrowers break the poverty cycle, too.

Issues covered: Poverty, economic development, lack of access to small business loans and other financial services
Focus country: Tanzania

Why choose microfinance with World Vision?

World Vision partners with VisionFund International, a wholly-owned subsidiary of World Vision, to distribute small loans to hard-working entrepreneurs in impoverished areas. VisionFund International is one of the world's largest microfinance institutions (MFIs), with a total loan portfolio of more than US$360 million. By partnering with VisionFund, World Vision can combine microfinance – which can't end poverty alone – with its other core development work (e.g. providing clean water, healthcare, nutritious food and education), resulting in a unique and truly integrated approach to community development.

What do microfinance and small business loans achieve?

Microfinance breaks the cycle of poverty by supporting entrepreneurs to establish small, sustainable businesses and create self-sustaining communities. As these businesses grow, new jobs are created. People can save for the future, send their children to school, pay for essential medical care and protect their children from forms of exploitation such as child labour. The small business loans are then repaid and the funds recycled back into the programme to help other borrowers achieve financial independence. This means the loans multiply many times over, helping families and communities for generations to come.

Since 1993, World Vision and VisionFund have distributed more than 3.1 million small business loans, totalling nearly US$1.4 billion. In 2010, every microloan, on average, created or improved 1.7 jobs and benefited 13 people's lives.

World Vision New Zealand successfully partnered with VisionFund Mongolia from 2007 to 2011. During this time VFM realized significant increases in the number of clients (49%) and the size of the loan portfolio (711%). By combining a state-of-the-art loan tracking system with high standards for client selection, the rate of loans repayments made on time remained high at more than 98%. With VisionFund Mongolia well on its way to covering its core operational costs, World Vision New Zealand began transitioning its support to VisionFund Tanzania in October 2011.

How can you get involved?

You can help hard-working entrepreneurs in Tanzania turn their sound business ideas into a steady stream of income, breaking the cycle of poverty.

• $50 a month will help one entrepreneur turn their fortunes around, providing access to fair-interest small business loans and insurance
• $100 a month will help support three entrepreneurs for a year

To make a regular contribution to World Vision microfinance, call us on 0800 800 776.

If you can't make a regular contribution, but would still like to support microfinance in Tanzania, you can also make a one-off donation.

• $300 will provide a microloan to a hard-working entrepreneur
• $3600 will fund a community bank, helping the poorest of the poor gain access to credit.

You can also make a one-off donation now to our microfinance programme

How microfinance works