Microfinance is a method of providing entrepreneurs and owners of small business access to capital.

In micro-financing, an extension of small loans takes place along with health services, savings account, peer support, and networking.

It helps the entrepreneurs to pursue their projects. Many enterprises on microfinance are available across the world.

Why microfinance is important?

Those people who are financially undeserved can get access to capital and resources with the help of microfinance.

 Financially undeserved means those people who are not able to get loans from traditional banks or get checking accounts.

If microfinance did not exist, these people would have to borrow money from their friends or family. With the help of microfinance, they are able to invest in their business

How Microfinancing Works?

Microfinancing helps the people in providing the necessary capital to begin work or business for generating income. In microfinancing, if the borrower even does not have any collateral, they get loans

Microfinancing consists of micro-loans, micro-insurance, micro-savings, which helps the entrepreneurs and owners of a business to uplift their business off the ground. With a micro-savings account, anyone can open a savings account without having any minimum balance. Micro-insurance is insurances with fewer premiums and low rates

Benefits of Microfinance

  • Create real jobs: With the help of microfinance, entrepreneurs can set up their business and provide employment opportunities to others. Thus more and more people can earn n income by taking these opportunities. More than 21 thousand people are employed in the Grameen bank located in Bangladesh. The primary financial products of that bank are connected to microfinance. Thus microfinance indirectly helps in creating job opportunities for people so that they can get out of poverty.
  • Provide Education to children: Parents who are living in poverty cannot send their children to school due to a lack of money. With the help of microfinancing products, families can send their children to school so that they can continue their education and end up with a fair paying job
  • Encourages people to save: With the help of microloans, people can meet their basic needs, thus they develop an inclination in themselves to save their leftover earnings for their future.
  • Reduces stress: With the help of microloans, people can give coverage to their household expenses. These help them in buying food and purchasing bills. Many people commit suicide as they are unable to meet their family expenses. Microfinance can help people living in poverty and reduce stress.
  • Better loan repayment rate: The overall repayment rate of loan is much better in micro-financing than traditional products of banking.


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