Microfinance

• Microfinance is a banking service provided to unemployed or low-income individuals or groups who otherwise would have no other access to financial services. 
• Microfinance allows people to take on reasonable small business loans safely, and in a manner that is consistent with ethical lending practices. 
•  The majority of microfinancing operations occur in developing nations, such as Uganda, Indonesia, Serbia, and Honduras.
• Like conventional lenders, microfinanciers charge interest on loans and institute specific repayment plans.
• The World Bank estimates that more than 500 million people have benefited from microfinance-related operations.

• It is an external source of financing
• It is long term financing

• Microfinance induces the possibility of future investments.

• Microfinance can help entrepreneurs to start business which can create jobs to others as well.
• Microfinance is a sustainable process of financing.
• It motivates people towards saving for future.
• It brings substantial economic benefits even if income levels stay the same.
• Microfinance helps families to educate their children.
• It provides  overall better  loan repayment rate compared to traditional banking products.
• It gives people access to credit.
• it supports quick and easy documentation process for loans.

• Microfinance provides only small amount of loan compared to other financial institutions such as banks.
• It charges high amount of interest for certain amount of loans and is calculated based on duration not per annum if less than 12 months.
• It provides only short term loan facility.
• Microfinance does not offer moratorium to the borrower
• Microfinance banks implement harsh repayment procedures since there are no criteria for providing credit and the loans are not collateralized.

• MFIs are generally organised for-profit entities, financial cooperatives, specialist commercial microfinance banks, or microfinance departments of larger commercial banks.

• Microfinance helps small businesses and entrepreneurs who come from underserved backgrounds. This saves them from turning to high-interest loans that smaller businesses are unlikely to repay.
•  

Microfinance helps families and small businesses to prosper, and at times of crisis it can help them cope and rebuild.