Choosing Microfinancing to Change the Game of Business
Microfinance is a significant element of empowering small businesses in rural and semi-urban regions of India where conventional banking is not readily available. Microfinance institutions, with the help of small loans, savings, and insurance, help micro-enterprises to grow, developing more for the kirana stores, handicrafts, agri-businesses & micro-manufacturing.
This is a blog that details the way microfinance operates, how it affects small businesses, the major benefits for entrepreneurs, as well as the common challenges and risks, and how small business owners can make use of available microfinance opportunities to their advantage. Check the loan agent app that can help you learn about the market.
Learn the Basics of Microfinancing
Microfinance is a type of banking that provides essential banking services to low-income earners or small business people, normally overlooked by the formal banking systems when it comes to small loans, savings accounts, and insurance.
This is all about strengthening financial inclusion in enabling the underserved communities to have access to the required capital and tools to start or scale-up businesses, enhance livelihoods, and improve economic resilience.
Why is Microfinance Popular in India?
- In India, there exist different channels to use while providing microfinance. NBFC-MFIs such as Bandhan Bank, Ujjivan, and SKS Microfinance provide small loans between ₹10,000-₹2 lakh.
- Self-Help Groups (SHGs), which are normally groups of 10-20 women who pool savings and receive group loans.
- My NABARD’s SHG-Bank Linkage Program links these groups to formal banks.
- Apart from this, digital lending platforms such as BharatPe and KreditBee offer easy microloans, increasing access to credit, making financial services inclusive, especially in the unserved and remote areas.
How are Microfinancing Companies Helping Business Owners?
Many small business owners are using microfinancing to boost their business ventures.
- To Get the Necessary Capital
There are thousands of small junkies who also have failures to receive loans from the banks because they have no credit history and no collateral. The void is being filled by Micro-finance institutions that grant collateral-free loans with little red tape, and this makes it easy for these entrepreneurs to be in a position to get funds to kick–start or scale up their businesses and implement changes in their lives.
Boost Women Businessmen
In India, more than 80% of micro-finance borrowers are women, who are given the power to initiate business in such areas as tailoring, food processing, and handicrafts. For instance, a woman in Rajasthan secured a ₹ 50,000 loan to buy a sewing machine to set up a small garment unit and be able to contribute towards the family finances in her own capacity.
- Good for Rural Areas
Farmers and rural entrepreneurs depend on microloans in order to purchase seeds, fertilizers, and basic farming equipment. These loans further propel them to set up small-scale farm enterprises such as dairy or poultry farming and open local groceries to earn them a constant income and support their families while advancing the cause of rural economies.
- Financial Inclusion
Microfinance allows those taking a loan for the first time to develop a credit history and increase the probability of obtaining loans from banks in the future. Small business owners realize a larger inventory, hiring workers, and the acquisition of newer equipment; this brings forth productivity and long-term growth prospects within the community.
Check the Key Benefits of Microfinancing
- Microfinance has its pros, which have a great influence on borrowers.
- There is no collateral, so it is easier to get compared to traditional banks.
Disbursal is almost immediate, within days, and loan repayment terms are flexible, either weekly or a monthly basis, to the cash flow of the borrower. Talk to a business loan agent whenever you are in trouble.
- It also helps establish credit scores, promote saving using MFI-linked accounts, and sustain the livelihoods of informal moneylenders sustain livelihoods.
How to Maximize the Benefits?
To get the best out of microfinance, it is necessary to select the best lender by comparing rates of interest, processing fees, and penalties between NBFC-MFIs, SHGs, and fintech. Don’t use loans to buy goods for personal needs, but use them for generating revenue through buying goods in large quantities, acquiring machine upgrades, or carrying out a marketing campaign.
Keep strict repayments in order to build your credit, through auto-debit or reminders. Benefit from the government schemes such as MUDRA and stand-Up India for easy and low-interest loans. Finally, spend some time learning the basics of finance in free workshops offered by NABARD or the local NGOs.
