Define the term 'micro-finance'.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2017). The mark or mark type is shown in brackets.

1. [2] The provision of financial services for poor and low-income customers (1) who do not have access to banking services such as loans and overdrafts offered by traditional commercial banks. (1)
2. [1] A partial definition such as 'the provision of financial services to poor customers' should be awarded 1 mark.
3. NOTE: Reference to 'poor' or 'low-income' must be made for 2 marks to be awarded.
4. [3] Answers may include: entrepreneurs use micro-finance to start businesses; entrepreneurs use micro-finance to operate and grow businesses; this provides an income and average incomes increase; provide finance which otherwise would not be available to high risk entrepreneurs with no credit score; such finance is likely to be at lower interest rates than traditional banks making it easier to pay back; small capital sums in the form of loans to poor aspiring entrepreneurs (especially in rural areas) have encouraged small businesses to be set up where previously there was no access to such funds; evidence that women, who traditionally have been denied financial services, have benefitted from micro-finance opportunities; growth of local economies; incomes rise and families are able to give education to their families; micro-finance institutions stimulate economic activity and development particularly through entrepreneurial activity – the multiplier effect.