Microfinance Loan – What is Microfinance Loan- Why microfinance is important- Objectives of Microfinance Loan-Microfinance Institutions-Salient features of Microfinance Institutions (MFI)

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Sources of Finance Available from Government Sector – Microfinance Loan, SHG, Government Schemes

The Government of India has undertaken several initiatives and instituted policy measures to foster a culture of innovation and entrepreneurship in the country.

Job creation is the foremost challenge with a significant and unique demographic advantage. India, however, has immense potential to innovate, raise entrepreneurs and create jobs for the benefit of the nation and the world.

Microfinance Loan:

What is Microfinance Loan?

Microfinance is a term used to describe financial services, such as loans, savings, insurance and fund transfers to entrepreneurs, small business and individuals who lack access to traditional banking services.

Why microfinance is important?

☆The idea is to provide extremely poor people with small loans so they can start and operate a business.

☆The borrowers are able to save money and pay back the loan overtime.

☆Microfinance helps support financial security because it is not just a donation.

Objectives

☆To promote economic development

☆To create employment

☆To promote self-sufficiency and self confidence

☆To lift poor people out of poverty and it is a way to manage the finances more effectively

☆To create the possibility of future investments.

Microfinance Institution

The organizations that lend financial help to the under-banked section of the society are the microfinance Institutions.

Microfinance institutions not only give financial help to the poor section of the society but also educate them on how to utilise the offered fund in a better way.

Salient features of Microfinance Institutions (MFI)

■These institutions offer loans to individuals who belong to the low income group.

■The loans that are offered by these institutions are of small amount and are known as microloans

■MFI provide loans to the borrowers for a short period. Once they repay the loan they again opt for another one.

■MFI give loans to people who want to start up a business of their own without any security or collateral.

■The repayment frequency of the microloans offered by MFIs is high and the borrower needs to repay the amount at quick intervals.

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