Microfinance and How they benefits low-capital investors

Hello everyone, I am very excited and delighted to be here once again, today I would be writing a post about finance today, unlike my usual crypto talks. I have decided to diversify my posts so that I can cover the topics that are related to this community which include; finance, cryptocurrencies, economics, politics, and the like. I recently made my introduction post to this community and I hope that you guys liked and enjoyed my journey here so far. If haven't seen my introduction post, here you have it.
Okay, let's dive into today's topic without wasting much time.

As mentioned earlier, we would be talking about microfinance today and one may ask what is microfinace? Yes, from the name we can say that micro means small or low whilst finance deals with how to manage money and others. So basically, microfinance is a term that is used to describe the banking services that provide low-income groups or low-income individuals with capital to help them start a business. We need to understand that microfinance has been there since the 18th century and it did not just get started now as others may think.

Microfinance involves lending to these low-income investors that is people or a group that do not have enough or adequate amount of capital either to start a business or to continue with the business they are running. Microfinance is usually given to poor people that are engaged in doing work or have an established business but lack the funds to help it grow. They can be found in some of the developing countries including Ghana, Cambodia, Indonesia, Afghanistan, Bangladesh, Ecuador, Congo, etc.

There are rules or what we call terms and conditions involved in taking those loans. They usually give them a format of repayment of that money given to them and also interest charge is added to the repayment amount. There are many benefits of these microfinance and they include the following.

Microfinance in giving out loans, provides them with reasonable loans that are payable and is given according to your strength and capability. Loans are not given so huge that the borrower cannot pay back maybe after things go wrong on his side. Most microfinance usually does give their support to women as they are those that involve in this small-scale business and the like.

Furthermore, microfinance provides different incentives or supports and they include, the provision o education programs to help teach students how to invest, the provision of capital or funds for a small-scale business start-up, and also involves the provision of savings accounts. Individuals or groups of individuals usually utilize microfinance to make savings by keeping with them small, small monies which they usually go around taking from them every day. They go about teaching students about accounting, management of cash flow, and also bookkeeping skills as well.

Sometimes, these basic things are thought to the individuals or groups of individuals seeking the loan before they are granted the loan. This is done to be sure that they don't later come back and complain they had no about what they did and so forth. Some of the areas they teach them include budgeting, cash flow concept, interest rates and how it works, and how saving and financial agreements function. After they have been educated on these topics, they are then given the chance to go ahead and apply for the loan which is granted to them. In the process of taking a loan, there is a person that oversees all the activities of the application including the lending process and approval of the loans, and that person is called "loan officer".

Also, in microfinance lending, the recipients of the loans are brought together to collectively pay back their loans and it is done so because collateral can not be given by most of the applicants. This method of collection of repayment is a way that all the recipients are involved in making payments of a certain amount either every 3 days or weekly to ensure that the loan is repaid fully and successfully.

Despite all the benefits, there are some criticisms about microfinance and they include the following. There are critics that the interest rates that microfinance offers to their applicants are higher forgetting that the various banks offer much higher interest than that.

Also, there are critics that microfinance organizations are trying to play tricks on the poor and cheat them by stealing from them. This is where I would end my article and I am hoping you guys would like and enjoy reading it. Let's make this post much more engaging by leaving out your feedback about this post in the comment section and I would surely reply to you back to keep the conversation going.

Posted Using LeoFinance Alpha