Benefits Of Microfinance Banks & Organizations For Business

Microfinance banks are established to cater for the saving and credit of small scale producers throughout the country especially those living in the rural area. Microfinance is the extension of very small loans (micro loans) to impoverish borrowers who typically lack collateral, steady employment and a verifiable credit history (Nobel law great Muhammad Yunus). He also stated that its designed not only to support entrepreneurship and alleviate poverty, but also in many cases to empower women and uplift entire communities by extension.

Microcredit is part of micro finance which provides a wider range of financial services especially saving accounts to the poor. Modern micro credit is generally considered to have originated with Grameen Bank found in Bangladesh in 1983. The United Nation declared 2005, the international years of microcredit. At 2012, micro finance is widely used in developing countries and is presented as baving enomous potential as a tool for poverty alleviation. Professor Dean Karlan from Yale university says that whilst microfinance generates benefits it isn't the panacea that it has been purported to be. He advocates also giving the poor access to saving account.

In the mid-19th century, individual analyst wrote about the benefits of numerous small loans for entrepreneurial activities to the poor as a way to alleviate poverty. Microfinance is just one factor influencing the success of a small business whose success is influenced to a much large extent by how much an economy or a particular market grows.

Justification

Microfinance bank as a tool organized to alleviate poverty across the globe, through lending small loans to the entrepreneur, market women, group of people and non-governmental organization. It is well known fact that microfinance is the extension of very small loans to impoverish borrower who typically lack collateral, steady employment and a verifiable credit history. Furthermore, I have read several; articles journals and people views related Id micro credit/microfinance on the issue of lending and repayment across the globe. I observed that, many borrowers default along the line of repayment which reduces the trust of microfinance bank on their borrowers. Also, microfinance lends to wisely reduce their designed roles.

Many microfinance organization now function as independent bank which has led to their charging higher interest on loans which has led their charging higher interest rates on loans and placing more emphasis on saving programme resulting to obstacle in the promoting of economic activities of the society or poverty alleviation as the main goal of the financial institution across the globe, hence making it so difficult for the borrowers to repay the money given by the I institution in some cases.