What is microfinance? Features of Micro Finance

Various non-governmental organizations (NGOs) in Bangladesh have been doing many micro-credit businesses about poverty alleviation.

Microfinance is becoming a milestone. Bangladesh is the inventor of microcredit and the pioneer of microcredit. Although I am proud to hear this, 40 percent of the total population of Bangladesh is still living below the poverty line.

According to economists, 30 million of these 80 million people are "extremely poor or extremely poor." According to SM Akash, Professor, Department of Economics, Dhaka University, even if all the programs and allocations for the poor in Bangladesh are spent together, the point is equal. Despite hundreds of attempts, poverty is not declining at an alarming rate. The practical application of poverty alleviation in Bangladesh has been mainly concerned with how to increase the income of the poor through micro-credit.

What is Micro Finance?

In recent years, microfinance has become widely known as microfinance. It has been adopted in the least developed and developing countries as an effective and more acceptable program for poverty alleviation.

Microfinance was initially defined as a limited one. The provision of microloans to poor entrepreneurs and lack of access to banking and banking-related services led to the emergence of microloans.

There were two main processes for providing financial services to such clients:

  1. 1) Relationship-based banking for individual entrepreneurs and small businesses; And
  2. 2) Group-based model, where several entrepreneurs applied for loans and other services as a group.

Definition of Microfinance (Joanna Ledgerwood) Joanna Ledger Wood says-

Microfinance has evolved as an economic development approach intended to benefit low-income women and men. The term refers to providing financial services to low-income clients, including the self-employed. Financial services generally include savings and credit.

Joanna Ledgerwood

Features of Micro Finance

The following are the features of Micro Finance.

  1. 1. Small investment, especially provisioning of working capital
  2. 2. Informal evaluation of investment recipients and investments
  3. 3. Group guarantee as an alternative to collateral creates mandatory savings
  4. 4. Debt repetition based on the reality of loan repayment, especially on extended lending-lending performance
  5. 5. Lending and intensive monitoring and
  6. 6. Build safe storage.

The objective of Micro Finance

The following are the objectives of Micro Finance.

  1. 1. To organize poor women and men
  2. 2. Build their confidence
  3. 3. Economic self-sufficiency and
  4. 4. Management skills.

Therefore, microfinance is a program adopted for simultaneous economic and social development.