The typical microfinance clients are low-income
persons that do not have access to formal financial institutions. Microfinance
clients are typically self-employed, often household-based entrepreneurs. In
rural areas, they are usually small farmers and others who are engaged in small
income-generating activities such as food processing and petty trade. In urban
areas, microfinance activities are more diverse and include shopkeepers,
service providers, artisans, street vendors, etc. Microfinance clients are poor
and vulnerable non-poor who have a relatively stable source of income.
Access to conventional formal financial institutions, for many reasons, is
directly related to income: the poorer you are the less likely that you have
access. On the other hand, the chances are that, the poorer you are, the more
expensive or onerous informal financial arrangements. Moreover, informal
arrangements may not suitably meet certain financial service needs or may
exclude you anyway. Individuals in this excluded and under-served market
segment are the clients of microfinance.
As we broaden the notion of the types of services microfinance encompasses, the
potential market of microfinance clients also expands. For instance,
microcredit might have a far more limited market scope than, say, a more
diversified range of financial services which includes various types of savings
products, payment and remittance services, and various insurance products. For
example, many very poor farmers may not really wish to borrow, but rather,
would like a safer place to save the proceeds from their harvest as these are
consumed over several months by the requirements of daily living.