An Invisible Finance Sector: How Households Use Financial Tools of Their Own Making Households often use informal tools that are harder to see from outside, like short-term loans from friends or relatives. It’s tempting to think that these informal tools are last resorts, or second-best solutions, but informal financial mechanisms are often combined with formal tools, and sometimes are preferred. This issue brief explains what informal finance is and how informal savings and borrowing tools are used; some reasons why people use such informal tools; the benefits, costs and limits of informal finance; and the implications of these findings for financial services providers and policymakers.