Micro finance is a term used for the practice of providing financial services, such as micro credit, micro savings or micro insurance, to poor people. It is a kind of movement by socialist peoples that would guarantee access of poor peoples to not only credit but also other financial services as saving, insurance, fund transfer etc.
Micro finance is a term used for the practice of providing financial services, such as micro credit, micro savings or micro insurance, to poor people. By helping the poor accumulate usable sums of money, they are able to expand their choices and reduce the many risks they face. As suggested by the name, micro finance, most transactions involve small amounts of money, frequently less than $5,000. Some governmental organizations define micro finance as amounts below $25,000.
REASON FOR MICROFINANCE
Reason for not providing loan to poor peoples is their inability to payback their outstanding loans. Most of these poor peoples have almost negligible substantial assets which cannot be kept as collateral with bank. Therefore banks often refrain from lending to poor peoples. As well banks transaction cost, administration cost of accounts, revenue etc is being effected by such low-income peoples. Good financial system is necessary for healthy development of national economy. As income of nation rises, its saving also increases ultimately which is being invested creating an effect on national economy. Although banks have provided a good system of financial services its role in building income of poor peoples is almost negligible. Banks often provide loan to richer peoples whose proportion is lower in low-income countries. Microfinance in this course provides a catalyst role in building incomes of poor peoples thus bringing them into national income stream.
CHRONICLE OF MICROFINANCE
• 1800- Theorists Lysander Spooner writes about the benefits of small credit & entrepreneurship as a way out of poverty
• 1870-... [continues]
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