Microfinance is a viable solution for financially-weak individuals to become financially-independent. It is basically credit or other forms of loans, checking, savings, and insurance product provided to individuals in a bid to help them meet business goals or personal needs. It is a very popular option in many developing countries and the reasons behind it are shared below.
A convenient alternative
Developing countries may have limitations in terms of jobs and opportunities. Poverty is mostly rampant, and many families struggle to meet daily requirements of food and shelter. As such, raising capital for a micro-business opportunity seems impossible to many and this is where the role of microfinance comes in. The sum loaned is not large, but it is enough to give them a standing for a business and meet some basic requirements. Since the rate of interest charged is comparatively lower than other loans it is a convenient and much-sought alternative.
Women are the backbone of many developing countries as they toil with their menfolk to keep businesses sustainable. However, there are certain societies where women are not encouraged to mingle freely with the rest of the society, and a microfinance to help them set up a home-based business has proven to be very successful. Pickles, stitching, artificial jewelry are some of the common options available and most of them join a collective microfinance to help sustain the financial burdens of their families. Most microfinance targets women because statistically they are more likely to make timely repayments than their male counterparts.
A channel for empowerment
Three of the most common group of people overlooked by a society are usually women, disabled and low-income communities. Inequal pay grades, inability to network and not knowing who to approach could be some of the reasons. However, there are microfinance companies whose target clientele is the above three groups. They create plans, interest rates and repayment options keeping the struggles and limitations in mind. In fact, some companies tie up with NGOs to help them develop skills for daily sustainability.
A guarantee for education
One of the first victims of poverty is education – it is expensive for a poor family, as it means one less earning member. But, with the help of microfinance, parents and guardians can ensure literacy for their kids which in turn can help them break the shackles of poverty in the near future. Loans can be used for education or setting up a business which spurs an income thus making education affordable for the family’s young.
As mentioned earlier, microfinance institutions provide customized financial solutions. To ensure they reach the maximum number of people, the institutions rely on microfinance management software to help coordinate activities and ease the processes. The software has provisions for type of loans, notification and alerts, multiple loan repayment modes, configurable types of loans, configurable charges and interests, and configurable fees amongst other things. Additionally, they go in for a software designed to make provisions for individual as well as group savings, which further enables the group or community to rise above poverty.