Microfinance

Through microfinance, money is lent out by a financial institution to a group of people instead of one. In this way the risk of default gets minimised. Most of the transactions are done with small amount of money, less than hundred dollars to be precise, that is why it is named as microfinance.

History of Micro Finance:
In the late 1970, the term microfinance first came into the picture. This concept introduced many new innovations and initiatives into the agricultural sector. That time, the main challenge was to make the people understand that:
They can really depend upon the microfinance system to repay the loans.
It is possible to offer several financial services to them through this system along with the market-based enterprise without subsidy.
However, later a new methodology for microfinance, named as “Solidarity Lending”, was evolved and the credit of that goes to Dr Muhammad Yunus of Bangladesh who won the Nobel Peace Prize in 2006.

Clients of Micro Finance:
Generally people of low income, mainly farmers, are the clients of microfinance.
The clients of microfinance usually don’t have any access to the big financial institutions or banks.
They are mainly based on the rural areas.
In the urban areas, members of micro financial activities include service providers, street vendors and small shopkeepers.
However, some clients relatively have a steady source of earning.

 

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Last Updated on : 30th July 2013