Many a time we have seen financial institutions advertising across different platforms “Microloans, Microfinance, Microlending” services. What is this service being offered to individuals and small businesses?

Let’s delve a little deeper into what this means, who is eligible or can benefit from it and how it empowers growing economies. Microfinance is best defined as the provision of financial services to employed or low-income individuals and small businesses, who traditionally lack access to banking and related services and those looking into accessing financing with quick turnaround times.

CAUTION: Borrowing more than you can afford to repay can lead to severe financial difficulties.

These financial services can be short or long-term loans ranging from personal loans to purchase order financing amongst other products. The loans are usually small manageable amounts that recipients can pay back over an agreed period with interest.

This service helps individuals to bridge personal financial gaps in-between their paydays and as for small businesses it helps them with working capital to fulfil their orders for their clients without the need to provide collateral to access these loans. For growing economies this service empowers low-income households to stabilise their income flows and realise their dreams and future needs. On the other hand, small businesses can grow and become profitable as this service enables them to continue trading. The income generated by these ventures not only empowers the entrepreneur to begin the move out of poverty, but it also creates opportunities for other community members to do the same through employment or supporting service providers.

 

All in all, microfinance has become an integral part of developing economies across the world helping to bridge the gaps for those who find themselves needing to fulfil certain needs but will not otherwise be eligible for conventional banking services.