Micro Finance

Microfinance is a vital component of the global effort to promote financial inclusion by providing affordable financial products. These offerings go beyond just credit—such as personal loans and credit cards—to include savings accounts, fixed deposits, and various banking services. This comprehensive approach is essential for fostering overall economic development.

The most widely accepted definition of microfinance refers to microcredit, which is aimed at unemployed individuals and those earning minimum wages. The organizations that facilitate this microcredit system are known as microfinance companies.

Types of Loans Offered by Microfinance Companies:

  • Loans for women to boost their income generation
  • Financing for local entrepreneurs
  • Emergency medical loans
  • Home improvement loans
  • Loans for home extensions or business enhancements

Recently, microfinance companies have started providing larger loans to their clients, enabling them to purchase essential items like mobile phones that are crucial for their businesses.

CREDIT SCORE AND MICROFINANCE

While many microfinance institutions lend to individuals who often lack a credit score, there is a significant opportunity for these target groups to enter the credit system by opening bank accounts and eventually obtaining loans, thereby building their credit history. The role of microfinance companies is crucial in helping more people gain access to credit and experience its benefits.