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In: Economics

How does microfinance differ from other forms of finance? How successful has it been in providing...

  1. How does microfinance differ from other forms of finance? How successful has it been in providing capital to poor households for self-employment activities?

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Expert Solution

Ans) Microfinance is also called as microcredit. This banking service is provided to unemployed or low income groups who otherwise do not have access to the banking services. Microfinance support many activities like opening saving accounts to providing loan for startups.

The basic difference between microfinance and other finance activities is their scope. While microfinance is mainly focused on helping an individual or community, other finance options focus on economy as whole. Microfinance starts with educating people on banking while other finance options aim for working on larger platforms and achieve widespread benefits. The amount of money involved in microfinance is usually very small than the other finance options.

Microfinance has been undeniably successful in supporting the poor and specially the underprivileged sections of the society like women. It has provided access to banking activities to the poorest of poor. It has also upto a significant extent successful in protecting people from the trap of moneylenders who charged very high interests. It has helped many poor to start their own business and become self sufficient. After the introduction of microfinance, there was sufficient increase in number of small scale business in rural areas. Women also got an opportunity to make themselves self reliant. With as small as opening a small shop, microfinance has been a revolution in rural economy.

However success is viewed by different people from different lens, many would argue about what it has not achieved. Nonetheless, microfinance has been quite a success and still has a long way to go to extend its help in more equitable way.


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