Securitization of Microloans

Securitization of microloans involves bundling many small loans into a single financial product, called a security, which can then be sold to investors. This process transforms illiquid, individual loans into tradable assets, providing lenders with quick access to funds and spreading risk among investors. Essentially, lenders package and sell these loans to raise capital, allowing them to issue more microloans, while investors gain exposure to the repayment streams from a diversified pool of borrowers. This improves access to capital for microfinance institutions and enhances financial inclusion for underserved communities.