Microfinance is a banking service provided to unemployed or low-income individuals or groups who otherwise would have no other access to financial services. it allows people to take on reasonable small business loans safely, and in a manner that is consistent with ethical lending practices.
Benefit of Microfinance
- It allows people to better provide for their families.
- It gives people access to credit.
- Attract more customers by providing easy and convenient value-added services
- It serves those who are often overlooked in society.
How Microfinance Works
Microfinancing organizations support a large number of activities that range from providing the basics—like bank checking and savings accounts—to startup capital for small business entrepreneurs and educational programs that teach the principles of investing. These programs can focus on such skills as bookkeeping, cash-flow management, and technical or professional skills, like accounting. Unlike typical financing situations, in which the lender is primarily concerned with the borrower having enough collateral to cover the loan, many microfinance organizations focus on helping entrepreneurs succeed.