Microfinance, also called microcredit, is a type of banking service provided to unemployed or low-income individuals or groups who otherwise would have no other access to financial services. The goal of microfinance is to ultimately give impoverished people an opportunity to become self-sufficient.
What is microfinance and why is it important?
Microfinance is important because it provides resources and access to capital to the financially underserved, such as those who are unable to get checking accounts, lines of credit, or loans from traditional banks. Microfinance helps them invest in their businesses and, as a result, invest in themselves.
Who are the microfinance clients?
Microfinance clients are typically self-employed, often household-based entrepreneurs. In rural areas, they are usually small farmers and others who are engaged in small income-generating activities such as food processing and petty trade.
What are the major objectives of microfinance institutions?
The major objectives of microfinance are therefore providing the poor with access to financial services as well as an opportunity for them to build their financial capacity and ability to grow to financial self-sufficiency.
What are the pros and cons of microfinance?
Pros and Cons of Microfinance Many argue that microfinance is very beneficial, as it provides financial opportunities for those in impoverished nations or those with lower socioeconomic backgrounds. Another benefit of microfinance is that it encourages people to be financially independent and provides them financial resiliency to be able to …
What is the role of micro finance in India?
One key component in the growth and development of micro enterprises is the establishment of micro-financing and micro credit in India. Micro finance is described as when credit or other such loan facilities of relatively small amounts are given to entrepreneurs and business people to start or fund a small business or a micro enterprise.
How does micro finance help to reduce poverty?
Generally speaking, microfinance institutions seek to reduce poverty worldwide. As they obtain funds and services from MFIs, recipients gain enormous financial benefits which trickle down to others in their families and communities.
