Question

What are the negative sides of Micro Finance impacts on economic growth ?

Answer 1

Hello Sir/Mam,

Microfinance - Microfinance it is a tool for providing improved access to finance for example deposit, loan, payment service etc. for those people who does not have bank accounts. however some also says that it is just a method to exploit the poor people.

Some are the negative sides of Micro finance

1. It deals with low amount of money and therefore it does not contribute more in GDP.
2. It is provided on some collateral assets which generally creates fear in the mind of borrower
3. The risk of non payment of loan is increase and therefore it increases the inflation in economic.
4. It charge high amount of Interest which results poor more poor and it increase the poverty in economic.
5. Microfinance are given to those people whose income is low, sometimes due to low income they are unable to repay the loan amount which also negatively impact on economics.
6. Peoples are getting debt trap in microfinance they are unable to came back out of it, it will result in depression, suicide attempt.
7. Most of the country facing problems due to microfinance, it will not reduce poverty, there are several methods to reduce poverty rather than microfinance.

I hope this clear your doubt.

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