What term refers to the provision of small loans and other financial services to individuals and small businesses in developing countries?

• A. Nonrenewable Energy
• B. PPP
• C. Literacy Rate
• D. Microfinance

Answer: (D)

Microfinance is the practice of providing small loans and a range of financial services to people and small businesses in developing countries who don’t have access to traditional banks. This approach targets low-income individuals who need capital to start or grow a business, smooth income, or cope with shocks, but who can’t meet the requirements of mainstream lenders. By offering tiny loans, savings options, insurance, and payment services, microfinance helps people build income-generating activities and manage financial risk, which can lift households and neighborhoods out of poverty. Institutions that specialize in this work—microfinance institutions or NGOs—often use methods like group lending and social collateral to reduce risk and reach clients who are overlooked by conventional banks. This term is distinct from nonrenewable energy (energy resources), PPP (partnerships for projects), and literacy rate (an education metric), none of which describe providing financial services to the poor.