2023-11-18 03:18:41
In the world of finance, The term microfinance refers to “small” money. These funds are borrowed from an institution that acts as a bank for people who do not have access to traditional banking services. Let’s find out more details about microfinance, why it is important and what it is for. they use.
Why is microfinance important?
1.4 billion people They still don’t have access to a bank account y They do not have the option of going to a local bank and applying for a loan or mortgage. This may be because they live in rural areas with little or no access to bank branches or because they do not have proper identification.
Every year millions of people receive help through microfinance and are served by thousands of institutions around the world. It is estimated that in 2022 The global microfinance market was worth US$200 billion.and is expected to reach US$506 billion by 2030.
Think about people who want to start a business to have family financial stability or to get out of poverty; Turning to a bank can be your path to Financial Freedom.
Who uses microfinance?
Although in theory anyone could request a service offered by microfinance, there are two examples that stand out as the most common.
Individuals. Ordinary people who have ideas to get out of poverty. Maybe they have crops to sell, products they want to produce, or a service they want to provide. These people need the help of a small loan to realize their dreams.
Small business. A small loan may be the best option for those who want to make an immediate change in their business.
What is microfinance used for?
One of the main reasons people turn to microfinance is to escape poverty. There are a few ways people do it:
Establish a business. People can borrow a small amount, as little as $100, and that may be enough to open a market stall to sell fruits and vegetables they have produced. The amount of money people can borrow increases as the business grows. Over time, some people will even manage to open stores to sell their products.
Expansion. Perhaps the person who needs the microloan already has a business running, but cannot cope with the new demand for their products or services. It could be that you need new machinery, a larger work space, or have more inventory on hand.
Working capital. For most businesses, there are months of the year that are extremely busy and other months that may be quieter. Regardless of how much work a company has, it always needs capital to stay solvent and keep the business running.
While there are many benefits to microfinance, perhaps the most important is the financial inclusion. By bringing people closer to financial services, microloans can have a positive and lasting effect on the lives of those who receive them and their families.
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