Low-income individuals who do not have access to standard banking services typically make up microfinance clientele. These are people who are unable to offer collateral for loans because they do not have a reliable source of income or a savings account. These people are the target of microfinance organizations, who offer them small loans to assist them better their life. Small business owners, farmers, craftsmen, and female business owners are just a few examples of these clients. Loan Ceilings in Microfinance Depending on the nation and the organization, a microfinance company may have different lending limits. The maximum borrowing amount can range from $50 in some circumstances to $10,000 in others. The client’s capacity to repay the loan and the kind of business they wish to launch are taken into account when determining the loan limit. In order to help their customers better manage their finances, microlending organizations often offer financial training and instruction. How Microfinance Organizations Operate Traditional banks operate differently from microfinance organizations. They don’t need collateral, and the approval of loans happens more quickly. The client’s character, capacity to repay the loan, and business strategy are taken into consideration during the loan approval procedure in microfinance organizations. In addition to offering its customers financial education and training to assist them better manage their finances, microfinance organizations work closely with their clients to guarantee that they use the loan for its intended purpose. The originator of microfinance The father of microfinance is economist Muhammad Yunus from Bangladesh. In 1983, he established the Grameen Bank in Bangladesh, which gave small loans to the underprivileged. Since Yunus’s invention of microlending, several microfinance businesses have sprung up all over the world.
In conclusion, microfinance has emerged as a well-liked remedy for the poor who lack access to standard banking services. It offers small loans to those with low incomes so they can start a business or improve their standard of living. The maximum loan amount varies by nation and organization, and microfinance businesses actively monitor their customers to make sure they spend their loans for the authorized purposes. Due to his involvement in the growth of microfinance in Bangladesh, Muhammad Yunus is regarded as the father of microfinance.