Microfinance means lending small loans, offering savings accounts facilities and basic other financial services to those people who do not have any kind of access to capital. The strategy of microfinance is to help people who are living in poor condition to be financially independent. It will help them to be resilient and they could support their families in time of financial difficulty. Half of the total world’s population lives below the poverty line, hence microfinance makes sense. Below mentioned are few benefits of microfinance.
Benefits of microfinance
- Reasonable loan payment rates- The interest rates of financial institutions are higher than that of those institutions which offer microfinance.
- Target women borrowers- Microfinance usually targets women as clients as the chance of payment default is less likely in case of women compared to men. Also, the loans help in empowering women.
- Access to a financial institution- The normal banks does not offer loans to people who have no or little assets. They do not engage in lending small loans without any collateral. The microfinance on the other side offers a small amount of loan. Small credit offering can help in eradicating poverty.
- Education- The families who avail the facilities of micro-financing will not pull out their children from schools stating financial reasons. They could also avail loan for the education of their children.
- Sustainability- A small business could use the help of the working capital loan which would be sufficient to run the business and it will help the person to come out of their low lifestyle.
- Improved health- Microfinancing not only gives better access to various health care but also offers access to better sanitation and clean water.
- Creates job- It helps to create employment opportunities which will, in turn, benefit the local economy.
For a developing country, microfinancing is a great help and a blessing. It works towards the development of the rural sector, thus helping out individuals to enjoy a better standard of living and be always prepared for the future. It creates confidence among young people which will naturally help in the advancement of the economy. The only thing which needs to be done is to create more awareness. A platform to make people aware of the microfinancing facilities has to be established so that the people will know whom and where to approach. Once it is done, the people definitely lead a safe and secure life.