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Entrepreneurship, skills development, finance

Microfinance can be an important support for the transition to formality both through providing incentives to move out of informality and through their position within supervisory frameworks. They have the advantage of being flexible and accessible to the poor while also being regulated. Importantly, MFIs can support informal operators’ access to other markets and income generating opportunities and are therefore attractive partners for informal economy operators that wish to grow. MFIs also often offer the advantage of not requiring formal property as collateral for loans and rely less on written documentation than formal financial institutions. Similarly, the underlying poverty alleviation orientation of MFIs enables them to meet both equity and efficiency objectives including job creation, reducing vulnerability and facilitating empowerment through group organization.