Microfinance is an application specific to small businesses. Microfinance has its own characteristics that distinguish it from traditional banking. It can be called a bridge between normal banking and microbusinesses. Microfinance helps businesses by providing small business loans at affordable interest rates. Microfinance is an application specific to small businesses targeting people and families who are not well-connected to traditional banks.
Microfinance has been designed for the benefit of small businesses that cannot afford commercial finance. This helps these small businesses get access to financial services that conventional banks provide. Microfinance also allows poor and non-English speaking borrowers to apply for small business loans in their mother tongue. In addition, microfinance helps poor and non-English speaking borrowers to understand and properly utilize the offerings of microfinance.
In the United States, microfinance targets disadvantaged and poor borrowers who cannot obtain traditional bank loans. Microfinance services include secured and unsecured loans. Secured microfinance loans are advanced through a grameen bank. Grameen banks are primarily Indian private financial institutions. An advantage of using a grameen bank is that borrowers are able to access the money they need through a formal or informal agreement between the microfinance lender and the borrower.
Unsecured microfinance loans are advanced through private non-profit organizations. The distinguishing feature of this type of loan is that the microfinance lender does not require a guarantee or collateral for advancing the loan. A Yunus is a poor person who is capable of earning his own living. Because of the economic hardships faced by the Yunus and many other poor persons around the world, the Government has established the Yuyunus Trust Fund to serve as an alternative source of funding.
There are many microcredit institutions that offer microfinance services to low-income individuals. Some microcredit institutions are government or municipality agencies, while others are private organizations supported by private interest groups. One type of microfinance that is available to low-income individuals is called “microcredit.” Microcredit is available from organizations that specialize in microfinance, including commercial banks, credit unions, and mortgage companies. Microcredit can be used for a number of different purposes, such as purchasing a vehicle, paying for computer training, or increasing the duration of a student’s student loan.
Microfinance has enabled millions of borrowers to achieve financial independence. Millions of poor borrowers throughout the world are benefiting from microfinance-related operations. However, microfinance-related operations have become a target for a variety of predatory lenders who are stealing the identities of vulnerable borrowers. Those who have experienced microfinance exploitation may also be in an adverse situation because they do not have access to extra funding through other sources. If you or someone you know needs more information about microfinance and predatory lending, please visit the Consumer Financial Protection Bureau’s website and search for consumer protection services.