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| What is microfinance? Ans: Microfinance is the supply of loans, savings and other financial services to the poor. The term “micro” is in reference to the small amounts typically involved in the practice. It is mainly given to the low income households in order to enable their livelihood activities and make them entrepreneurs. On a whole it is an attempt made to establish financial inclusion of the poor. How does microfinance help the poor and what is the role of a MFI? Ans: Microfinance refers to a movement that envisions a world in which low-income households have permanent access to a range of high quality financial services to finance their income-producing activities, build assets, stabilize consumption, and protect against risks. These services are not limited to credit, but include savings, insurance, and money transfers. As the poor are not in a position to get the access of bank because of the lack of availability of bank at all places, lack of collateral to support their loans , lack of education to communicate with the bank. So a MFI’s role comes here were it is in a position to offer micro loans to the poor and also is in a better position to communicate and understand the needs of poor. Why MFI charges a high rate of interest? Ans: Unlike banks the MFI’s have a lot of processing cost like appointing loan officers and branch managers so inorder to meet the high processing cost high interest rates are charged. There is a problem of 100% recovery as the loans are offered to the poor and there may be a risk that they are unable to pay the amount back. Moreover this is a way for the MFI to be self-sustaining so that it can be a stable, long term provider of finances in its area of operations in the future. Does microfinance work for all the poor? Yes, MFI work for all the poor but there is a condition that the poor must have at least some capacity to repay the loan they have taken. There is also one more way to ensure that the poor repay the loan, it is by formation of groups of five where each individual is responsible for the other and even if one member defaults the entire group takes the responsibility to repay the loan they have taken. Why do we only lend to women? Women tend to use resources more better than men and they are also very responsible in utilizing the money without wasting them. Moreover it is well known that women is center of the family empowering her means empowering the entire family. What are the different types of services offered by us? There are 3 types of loan offered. They are: 1.Supplimentary loans, 2.Income generation loans, 3. Education loan. What are the other services offered by us? There is Birla Sun Life insurance service offered for the clients who avail our loan. |