Microfinance and its Benefits

Microfinance can be defined as a lending service dispensed to low-income individuals or groups as well as unemployed people who generally do not have access to financial services. There has been precedent that shows that microfinance has helped the financially poor to reduce their susceptibility to external shocks, improved income, and build feasible businesses. Women do not have proper documents for identification or certificates of land or house ownership, thereby hindering their access to formal financial institutions. Large banks do not provide loans to people with little or no assets. Microfinancing comes to the rescue as they are based on the ideology that small credit amounts can be a step towards ending the cycle of poverty. Microfinance aims to break this cycle by making more money available. Availability of funds means the basic needs are met. Investments can improve sanitation, build better wells, and better health care. An increase in employment benefits the local economy as more money circulates through local businesses and services.

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