We talk and discuss a lot of developments in every area and how technology has become an important part of our lives. While everything is taking a new turn in this development era, there is a rapid revolution to solve the problem of poverty around the world by supporting the poor and weaker sections of the society financially.
This is possible with the introduction of Microfinance which is also known as microcredit. This is a group of financial products which can cater to the needs of the society especially the lower income class who cannot manage high repayment loans. The products can be in loans, insurance and savings sectors.
Purpose of Microfinance
This concept was born traditionally to solve poverty which was the biggest issue the world faced by many parts of the world. Previously there were only nonprofit organizations providing such microfinance services to the people, but recently huge changes have been made to this sector by ideally joining with retailers for better financial support.thus it has become easier to cater to a larger customer range.
Products of microfinance
The common categories of products and services offered by microfinance are:
- Microloans: these are the microcredit facilities offered to the people at the smaller amount and to finance entrepreneurs in developing countries.examples could be the cottage industries like sewing, basket making etc.the average interest rates could be very convenient for the customers.the rate of interest might look high but when compared to the local and informal money lenders who are not credible the microloans are safer and easier to repay.
- Microsavings: these are a small amount of savings that the poorer section can make without any minimum balance requirements in their accounts. These are made for emergent and lifesaver needs like weddings, funerals and family occasions. Such savings promote the savings capability of the weaker class of the society and help them at the right time.
- Microinsurance: when living in a developing country has a lot of exposure to enjoying its benefits it also has some risks of natural disasters and calamities which may be unforeseen. Thus to make it easier for survival at such times, there is this concept of microinsurance that allows the people to maintain small insurance policies with minimum premium values. One classic example can be crop insurance to protect farmers during natural calamities and help them get back what they lost.