Question

what is micro finance and how can it contribute to economic growth.

Answer 1

Microfinance has been observed as a strong determinant of economic and social growth. It is helpful in assisting the impoverished in improving their standards of living. It can do so by providing them finances in smaller amounts to begin the process of development in the regions deprived of development in past few years. For their development an appropriate structure of microfinance institutions is important.
Microfinance can be understood with the terms like micro credit purchase loans insurance saving and related financial products that are to be used by low income clients
These small loans are extended to individuals who are not rich enough to qualify for traditional loans due to lack of assets as mortgage. For the growth of microfinance there should be an appropriate infrastructure of micro finance institutions including insurance companies and rural banks.
Microfinance is very helpful for the growth of the economy especially in the elimination of poverty in developing countries. There is a growing recognition that it is a socio economic development tool because it works at grassroot level improving the conditions of the rural poor and urban poor. It helps the women entrepreneur who often lack finance because no traditional Bank provide loan for businesses that are done by rural women. Micro financial successful for these businesses because women borrowers are evidently seen as good repayers than men.