Microfinance And Small Scale Business

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Microfinance are the financial institutions who provide loans or funds to individuals who do not possess the actual documents which can be submitted to banks to seek/borrow loans. These individuals can be entrepreneurs and small scale business owners. Microfinance institutions mostly function in developing countries when compared to developed countries. They are almost similar to banks with regards to the nature of functioning, for instance, they fund people who would like to start a poultry business (farmers), transportation and restaurants.
The functions as mentioned earlier are similar to the banking institutions, however, the range of transactions are in small scale. The transactions mostly happen with few hundreds of dollars. The money borrowed are often used to buy the tools and necessary items to start with construction in case of a new small business or for reconstruction in case of an established trader. The main purpose of these small entrepreneurs is to support their families and the run their business to get themselves out of poverty. Microfinance institutions lends loan on short term basis where the borrower is expected to pay their loan within 6 months to 1 year. Hence these institutions do not require much documents prior to approve the loans, as it can be seen with most banks.
What kind of innovation is microfinance today?
Microfinance was started as a Social Innovation by a Bangladeshi social entrepreneur named Muhammad Yunus. His intentions
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