Microfinance is the idea to provide services banks and insurance companies provide to those people who usually are not served by such businesses. It is an important form of development aid. Serving these people is usually very expensive for banks and insurance companies; that is why they usually do not do it. Speciaized NGOs provide these services:
- Banking and other services are based on a personal relationship, rather than commercial interests.
- Very often, several people apply for a loan or insurance together.
As an example, microfinance allows people in underdeveloped countries to start their own businesses for their family.