Question

explain in an paragraph what is microfinance and how it is different from regular finance , describe in detail of all the differences. how can microfinance help eradicate poverty? Is microfinance sustainable? what kind of projects can develop drom microfinance?

Answer 1

Answer:-

Microfinance:-Microfinance is basically providing loans usually in small amount to poor and unemployed individuals who have no access to banking and other financial institutions.Its main purpose is to make poor people an opportunity to become self-sufficient.Most of micro-financing operations are prevelant in developing nations.Micro-Finance Institutions charge reasonable interest on loans and have a repayment plan.Many microfinance organizations educate and help enterprenuers succeed.

Difference between Micro-Finance and Regular finance:-

Amount of Loan:-Microfinance provides small amount of loan while regular finance may provide large amount of loans.

Given by:-Microfinance loans are provided by Co-operatives,Agri banks,etc. while regular finance loans are given by Banks and other organized financial institutions.

Who gets:-Poor people having no access to banking institutions who wants to start small business.Regular finance is given to creditworthy businesses.

Collateral:-Microfinance institutions may give loan without collateral while in regular financing collateral is compulsory.

Microfinance can help eradicte poverty as it provides loans to poor and educates them to become successful entrepreneur.Thousands of people attain financial stability through microfinance.Its a key strategy to help people below poverty line to attain self-sufficiency. It also has educational facilities on business management and children's and women's health.Most microfinance institutions provide collateral free loans and less paper work hence poor section of the society can also start business on small scale and improve thier standard of living.

Microfinance and sustainability:-

Microfinance are often considered as a key tool for eradication of poverty.Various barriers for development of micro finance institutions are managerial resources,legal resources,ethical problems,etc.Their operations are not much efficient because of lack of resources.Moreover,they provide collateral free loans due to which risk of these loans becoming non-recoverable is higher.Expansion of micro-finance is a major challange because of these problems.However,government programs of providing subsidy,financial support to microfinance institutions can help in survival of those institutions.

Projects that can develop from Micro-finance are handicrafts,village artisans,coir industry, stitching,etc.