MICRO FINANCE

Very simply put, microfinance means fulfilling financial needs of the needy. The poor, the needy, they require assistance for small amounts for their immediate requirements – education for their children, health emergencies, or setting up their own small shops and services. When such poor and needy people come together to form a group and financial assistance is provided to them through loans, it is called microfinance.

Microfinance, initiated by Muhammad Yunus in 1976, has proved to be a very crucial step in the upliftment of low-income rural and urban people across the world, and is still successfully implemented and running till today. The key highlights of microfinance are:

  • Microfinance is an innovative form of lending that empowers the poor, that make up half of world population
  • Microfinance empowers women as they take more financial decisions, save and invest money and allocate resources wisely
  • Lending to women, as it benefits the entire household. Since women have no other access to credit, they remain loyal to the group and pay their loans on time
  • Since the loan amounts are small and lent for shorter durations (about a year), people find it easy to take and pay back loans, while making their business and economic statuses grow
  • Since the application process is very easy, microfinance is popular
  • Group formation and peer pressure keeps an emotional connect within and a check on all the members
  • Their saving habits also increase
  • Lower interest rates are another important reason for its popularity
  • Microfinance leads to creation of many enterprises, even though single-person ones. But they instil an entrepreneurial and professional spirit and ethics among the family members, especially children
  • As households prosper, aspirations fly higher and members work harder towards achieving a better life

With the increasing use of microfinance, consciousness has been raised in the sectors of health and education among the women. Apart from poverty alleviation, microfinance enhances skill development, entrepreneurship and self-sufficiency. It also proves that the poor are not a burden on any economy, but they can contribute to it in a very constructive way.