What are characteristics of microfinance?

Key Features of Microfinance

The borrowers are generally from low income backgrounds. Loans availed under microfinance are usually of small amount, i.e., micro loans. The loan tenure is short. Microfinance loans do not require any collateral.

What are the characteristics of microfinance clients?

Microfinance clients are poor and vulnerable non-poor who have a relatively stable source of income. Access to conventional formal financial institutions, for many reasons, is directly related to income: the poorer you are the less likely that you have access.

What are the characteristics of microloans?

A microloan provides a lump sum that the borrower pays back with interest via regular payments over a set period of time; the main difference is that the loan amount is usually smaller. Microloans are often paid back over three to six years, though the term can vary depending on the lender.

What is the main function feature of microfinance institutions?

Key Takeaways

Microfinance is a banking service provided to unemployed or low-income individuals or groups who otherwise would have no other access to financial services. Microfinance allows people to take on reasonable small business loans safely, and in a manner that is consistent with ethical lending practices.

What are the objectives of microfinance?

The objective of microfinance is similar to that of microcredit; its goal is to provide financial services to help encourage entrepreneurs in impoverished nations to act on their ideas and obtain the financial tools available to do so and to eventually become self-sustainable.

What are the elements of microfinance?

According to the World Bank, there are traditional characteristics that can be identified with microfinance services: small transactions, credits for entrepreneurial development, group base lending methods, targeting poor communities, targeting females, a simple application process for loans, and low-interest rates ( …

What are the three main principles in microfinance?

These are Principle 1 (Objectives, independence, powers, transparency and cooperation), Principle 4 (Transfer of significant ownership), and Principle 5 (Major acquisitions).

What are the key principle of microfinance?

Principles for Sustainable Microfinance Lending. Recover the costs of the loan. Small loan sizes and personalized service result in costs per loan that require interest rates significantly higher than commercial banks (although significantly lower that informal sector rates). Expect repayment.

What are benefits of microfinance?

Benefits of Microfinance
  • Providing immediate funds.
  • Access to credit.
  • Better rates for Loan Repayment.
  • Provides for those who go unnoticed.
  • An opportunity to receive education.
  • Possibility of future investments increases.
  • Creation of Real Jobs.
  • Significant Economic Gains.

Who are the target clients of microfinance bank?

Who are the target clients of Microfinance Banks? Microfinance Banks target client includes the following group of persons: (a) The economically active poor. (b) Low-income households (c) The un-banked and underserved people, particularly vulnerable groups such as women, youths and the physically challenged.

What is the target market in microfinance?

The target market for microfinance institutions includes poor people who are unable to get loans from traditional banks, who want to start or expand their businesses, send their children to school, cope with unexpected expenses, and are women entrepreneurs.

Who are the stakeholders in microfinance?

Based on literature, this paper identifies six types of microfinance stakeholders who sit on boards. These are clients, employees, government, donors, creditors and owners. The paper discusses different roles of these stakeholders when they sit on boards of Microfinance Organizations.

What are the distinguishing characteristics of micro finance from conventional banks?

Microfinance is individual-focused and provides money to needy individuals or small businesses that lack access to conventional resources. Microfinance has lower capital costs relative to risk, no collateral, and greater leverage than traditional banks.

What are the activities of microfinance?

Examples of Microfinance Services
  • Group Loans. …
  • Individual Business Loans. …
  • Agriculture Loans. …
  • Insurance. …
  • Money Transfers. …
  • Energy Loans. …
  • Savings Accounts.