Bachelor of General Studies (BGS) Degree Practice Exam

What does microfinance primarily refer to?

1. Lending to high-income corporations

2. Lending money to low-income businesses

3. Offering savings accounts to the wealthy

4. Investing in stock markets

The correct answer is: Lending money to low-income businesses

Microfinance primarily refers to the practice of providing financial services, including small loans, to individuals and small businesses in low-income communities who typically lack access to traditional banking services. This approach aims to empower those with limited resources by enabling them to start or expand their small businesses, increase their income, and improve their overall economic situation. Focusing on the second choice, lending money to low-income businesses directly addresses the goal of microfinance: to target underserved populations who need capital to enhance their livelihoods. These small loans can help foster entrepreneurship and promote self-sufficiency among borrowers, addressing poverty and contributing to economic development within communities. In contrast, the other options revolve around financial activities that do not align with the principles of microfinance. Lending to high-income corporations, for instance, typically involves larger amounts and a different risk profile that does not focus on poverty alleviation. Offering savings accounts to the wealthy or investing in stock markets diverges from the microfinance model, which is centered on providing accessible financial support to those at the bottom of the economic pyramid.