Micro Finance

  • Micro Finance has an important role in the implementation of the principal objective of the Asian Development bank for alleviation of poverty in Asian countries and the Pacific region. Micro finance is an excellent way to take care of the financial needs of the poor and to improve their living standards.

    The products and services of micro finance are varied in nature and they include the following:

    Loans
    Payment services
    Money transfers
    Deposits
    Insurance for the poor and households with low earnings and their micro enterprises

    The sources of micro finance can be categorized into the following types:
    Formal institutions, for example cooperatives and rural banking institutions
    Semiformal institutions like nongovernmental institutions
    Informal sources, for example traders and money lending institutions (merchants)
    Micro finance services offered by formal and semiformal organizations are regarded as institutional micro finance. Micro finance institution is that type of an institution, which principally focuses on supply of micro finance facilities.

    The majority of poor people all over the world are not able to approach the financial services offered by different institutions.

    The formal financial service providers refuse to provide loans to the poor simply due to the following reasons:
    The anticipation of greater risk
    The involvement of increased cost in minor transactions
    The poor people are unable to offer any salable security for obtaining a loan
    The micro finance institutions all over the world intend to assure that the poor people can approach the financial services on a perennial basis. This objective also provides a lot of opportunities to poor people who want to do business on a small scale.

    For accomplishing this goal, the micro finance institutions stress on the following:
    Development of financial infrastructure
    Setting up feasible retail institutions
    Helping foundations that are in favor of the poor
    Backing social mediation
    Producing an environment which is amicable to micro finance policies
    If the poor is offered with better savings facilities and improved accessibility to insurance and loans, then they are able to handle risk, increase their earnings, grow their assets and cherish an improved life.

    For further details, please refer to the following links:
    What is Micro Finance
    Micro Finance Institutions
    Micro Finance Bank
    Micro Finance Projects

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    Last Updated on : 1st August 2013