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What Is Microfinance And How It Improves Our Financial Well-Being

April 21, 2023

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    Table of Contents

      Microfinance breaks the cycle of poverty and improves the financial well-being of individuals with a chance to create a brighter future for themselves. Microfinance provides a source of capital for small businesses and entrepreneurs and promotes economic growth and development.

      How easy is it to avail a loan or credit from the bank when you have a decent paying job or enough collateral or a successfully running business and how microfinance improves this access for those without these advantages? At times, big businesses or high-income personalities don't even need to prove their worth- making several financial services available to them with minimal effort.

      But who takes care of the financial needs of a not-so-well-off person/business? What if someone is unemployed and in dire need of money? What if you have a small business that needs funding urgently? 

      At least banks aren’t always ready to lend money unless you submit proof of your financial stability. Even then, it is not guaranteed that you will be able to get it. 

      Now, this is where the concept of microfinance jumps in. 

      Microfinance services basically mean providing banking services to unemployed or low-income individuals. Microfinance institutions carry out functions like lending loans that are consistent with ethical lending practices. In addition, many such institutions may even provide facilities for savings accounts, chequing accounts, and micro-insurance services. 

      Efforts to spread financial education, inclusion and scaling up small businesses are also core features of microfinance institutions. 

      In short, we essentially need such services as they help in strengthening the financial infrastructure from its inception. 

      As we are advancing through technology and innovation in every possible field, so is the case with micro-financing. There are plenty of apps, now in operation, that are revolutionizing the methods of microfinance. 

      For you, these apps can be a great pathway toward financial well-being. Certain aspects of microfinance apps like readily available credit, easy loan repayments, future investment options, etc. can definitely save your finances anytime. 

      Hence, if you are looking for a comfortable place to manage your finances or get access to readily available limited banking services, microfinance apps are the place to be. 

      Benefits of Microfinance Apps- Here’s How They Improve Your Financial Well-being: 

      Get easy access to funds

      Microfinance apps make it possible for you to alleviate property with much ease. For small enterprises, these apps make it easy to run and expand your business. You can get access to funds even if you are currently just focusing on keeping your business on and not necessarily diversifying it. 

      With readily available resources, unemployed people can also meet their basic needs and focus on up-skilling themselves. 

      In case you are currently struggling with the unavailability of funds to upscale your business, how about trying it through some microfinance app with very little paperwork and no hassle? 

      This further has a positive externality for the economy as a whole- the creation of real jobs. 

      When enterprises are able to expand, no doubt, they’ll hire more and hence benefit the skilled labour force. With better wages and employment opportunities, the children of these families of workers will see a gradual increase in education opportunities, nutrition availability and better living conditions. 

      Aim of universal access to credit

      Well, though it is tough to avail credit from banks by anyone with a marginal financial background, this problem is even more acute for certain sections of society. For instance, women, people with disabilities, unemployed individuals, extremely poor people, etc. are the main beneficiaries of microfinance institutions. 

      This makes it clear that microfinance institutions are able to break the stereotype of formal banking institutions by making it simple for people with little to no assets to gain financial support. 

      This feature of microfinance institutions is the key to breaking cycles of poverty and ensuring that innovation, skills and financial well-being are ensured in the economy. 


      Better rates of low repayment

      Microfinance services, though available to all, generally target women borrowers who find it difficult to get such facilities anywhere else. 

      For this reason, the rates at which the loans are to be repaid are much lower than other official banking institutions. This is why borrowers of microfinance services find it easy to repay them. As per statistics, around 98% of borrowers repay loans in the case of microfinance institutions. 

      Breaking the poverty cycle

      Poverty cycles are vicious and facilities of monetary assistance are the first step to tackling them. Microfinance institutions do just that. They target problems at a low level and nurture the whole financial structure of the economy. 

      To ensure that there is overall growth in the economy, it becomes essential to support innovation while providing enough to make the ends meet. Microfinance institutions and apps make it possible for small businesses and marginal sections to rely on available funds and later carry out investments to further improve their conditions. 

      Government ensures the presence of a financial system but banks and microfinance institutions keep it running. This two-fold effect of big banks and microfinance institutions that target big and small businesses respectively is necessary for any economy.   

      Further, microfinance apps can generate reliance, significant economic gains and general happiness- as reflected by the high rates of loan repayments. 

      Financial education 

      Besides monetary benefits, many microfinance apps have now been focusing extensively on spreading financial literacy among various sections of society. 

      Financial awareness decides your ability to take control of your money effectively and alters your investment decisions. Without proper guidance and knowledge, your luck alone won’t make you financially savvy. 

      Through the spread of basic and even advanced financial education, microfinance apps are creating new enthusiasts regarding savings and investment. 

      Bottom Line 

      Microfinance apps are the new-age pioneers of easy access to small credit. Be it a small business, a self-help group, an unemployed individual or a financially unsound person, everyone can reap the benefits  f microfinance and start their journey to financial freedom. 

      One of the major features of microfinance apps is the availability of loans ‘collateral-free’! Therefore, if you are just starting out in the business world and need support, microfinance apps are the right place to be. 

      Besides the previously mentioned benefits, microfinance apps are now even more diversified. Some focus specifically on providing loans and credit while others are helping you to save and invest. Whatever is your need, you can find the desirable type of app easily! 

      For more such informative content, download the Jar app. Jar aims at creating saving habits among masses while encouraging them to invest in digital gold. With just Rs. 10, you can begin building your financial portfolio and get 24 carat gold delivered right at your doorstep.