Benefits of microfinance When illness strikes, people on low-incomes often respond by foregoing their children's education, selling limited assets (including those used to make a living), borrowing from informal sources at exorbitant rates or foregoing medical treatment. Limited access to formal credit and savings arrangements constrain health-care financing options for these people. In low-income countries, private sources (including out-of-pocket expenses) account for more than 60% of health-care expenditure; 20% more than in upper-middle and high-income countries. (1) With such a high percentage of care financed privately, residents of developing countries are particularly vulnerable to financial instability from health shocks (i.e. new and significant issues). Microfinance has been successfully deployed to compensate for the lack of traditional financing opportunities in developing countries. (2) It can also be used to help finance care for excluded populations. Microfinance broadly refers to small loans, savings opportunities, insurance and other financial products and services tailored for poor people. The most common tool, microcredit, is the extension of small loans, often without collateral requirements, usually for self-employment projects that generate income. By capitalizing on social networks in poorer communities and developing channels into the informal economy, microfinance is assisting millions of people, particularly women, to improve financial resilience. Additionally, by promoting local entrepreneurship, microfinance helps build a more resilient and secure local economy. This resilience is demonstrated in a review by the Inter-American Development Bank of the recent global recession, which indicated that industry leaders in microfinance matched or even outperformed their commercial bank counterparts in key performance indicators. (3) Box 1 shows additional characteristics that promote the economic resilience of microfinance institutions. Due to its success in providing conventional financing for poor communities, microfinance is now being used as a tool for financing and also education and prevention. Box 1. Characteristics of microfinance institutions * The amount of each loan is relatively small (typically US$ 50-1000) shielding the institution from large single losses. * The term of loans is short (usually a few months), allowing greater flexibility in terms of which sectors anal individuals receive loans. * Interest and capital are repaid in a large number of small instalments, allowing close monitoring of clients for potential distress. * Banking officials often visit the customers helping to establish personal relationships, maximizing repeat borrowing. * Decentralized decision-making allows for quick loan-making decisions anal enables loan makers to respond quickly to changes in borrower or overall market conditions. * Group lending anal solidarity groups further dissuade users from defaulting on loans. Health promotion and education Several microfinance programmes have incorporated preventive education as part of services based on either public service motives or from the belief that education will lead to higher repayments, client retention, and increased profit. In South Africa, for example, the IMAGE (Intervention with Microfinance for AIDS and Gender Equity) project combined a microfinance programme for women with HIV and gender training curriculum. The results of a randomized control study indicated that a microfinance and training intervention resulted in a > 50% reduction in intimate-partner violence among programme participants. (4) Furthermore, after two years the study showed an improvement in nine measures of empowerment, including self-confidence and financial confidence. Other research has shown that improvements in women's income through microfinance projects led to advancements in preventive care. …