Microfinance: Honey, they shrunk the loan size!

In this episode of ‘A Dictionary of Finance’ podcast we invited Per-Erik Eriksson, head of inclusive finance at the European Investment Fund, and Hannah Siedek, impact microfinance investment officer at the European Investment Bank, to explain to us what microfinance is. We hear stories from sub-Saharan Africa, where Hannah used to work, about borrowers who, barefoot, would be intimidated by the freezing cold, air-conditioned buildings of traditional banks, and wouldn’t dare to go in. But who then go to a microcredit provider, buy a few cases of beer and start a bar, and in the end take a loan worth several-thousand euros to expand to a second bar, already creating a couple of jobs. Stories about how microfinance is making a difference. We also hear about why microcredit costs so much. An annualized interest rate of 25%?! High time governments put a cap on that… Or is it?

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