What is Microfinancing?

Small businesses are started with the sole hope of reviving their economic and financial status, but when the shop started with their savings shuts down, their only hope is microfinancing.

What is Microfinancing?
MIcrofinancing

Do you know what is microfinancing? This article would answer two questions for you - What microfinancing is and what the benefits of microfinancing are.

Microfinancing is the action of providing loans, savings accounts, and insurance to economically weaker sections of people. Most of the time, small businesses from the weaker sections of society do not get access to capital (money/monetary help) from any major financial institutions. Here comes microfinancing. Answering the question - what is microfinancing - the answer would be lending poor people loans to set up their businesses to provide for their families. 

Indian institutions mark one lakh rupees as microloans without the need for any collateral.

There are very specific reasons for the flourishing of microfinancing in India, and these actually benefit the economically weaker sections of India - 

1. One of the many benefits of microfinancing is the availability of loans for small businesses. Those people who have no access to savings accounts and loans are the ones targeted and helped through these setups. 

2. Small loans or credits can be availed by the people which makes future investments possible.

3. Loans are offered to those unemployed, so they can save some amount for future use. There is a generation of employment in the families where they tend to spend less and save more.

4. Children from families get better access to even better educational opportunities. This is important to be noted because often children are made to drop out of school due to financial deficits. 

5. Women are provided access to education and financial assistance to help them gain confidence for future businesses and financial independence as well.

Small businesses are started with the sole hope of reviving the family’s economic and financial status, but when the shop started with their savings shuts down, their only hope is loans from banks. But, banks do not provide direct loans to people from economically weaker sections of society. They source institutions that provide microfinancing without collateral. This article has covered answers to two questions - What is microfinancing and the benefits of microfinancing.