Microfinance is one of the financial services aimed at individuals and small companies who are unable to get traditional banking or related services. It encompasses microcredit, the offering of small-sized loans to clients with low incomes, including checking and savings accounts, microinsurance, and payment systems. The services offered by the company are designed to be affordable for the less fortunate and marginalized social groups and help them become self-sufficient.
In the beginning, microfinance was an ambiguous definition. It was generally the offering of microloans to poor entrepreneurs and small-scale businesses that aren’t able to access credit. The two principal methods used to offer financial services to these customers included:
1. A relationship-based bank that focuses on entrepreneurs and small businesses.
2. Group-based models, wherein groups of entrepreneurs meet to request credit and to avail of other assistance together.
However, microfinance is now emerging as a significant trend. Everyone, particularly the most vulnerable and socially marginalized households, can access an array of low-cost, high-quality financial products and services, not just credit, but savings and payments, insurance, and even fund transfers.