Microfinance is a type of banking service provided to those who have difficulty in accessing formal financial services. It is targeted at the low-income and unemployed fraction of the population . The institutions supporting microfinance offer services such as lending, setting up bank accounts and providing micro-insurance products. In developing countries such as India, financial services through formal channels do not meet the demands of the rural poor, so microfinance can help small-scale businesses flourish by providing greater financial stability.
Some of the significant features of microfinance are as follows:
The part that microfinance plays in economic development is noteworthy. Some of the key benefits of MFIs include the following:
Microfinance includes the following products:
3. Microinsurance – Microinsurance is a type of coverage provided to borrowers of microloans. These insurance plans have lower premiums than traditional insurance policies.
Microloans can be used for various business related activities, such as meeting working capital requirements, maintaining cash flow, starting a new business, managing day-to-day expenses, paying salaries to staff, debt consolidation, etc. People facing trouble in availing business loans generally consider microloans or micro finance.