Original Content- Business Upside
Most banks and financial institutions are shy of lending to low-income households, rural women, and small businesses as they consider their high-risk profile and high-cost transactions. The reason is that these borrowers are found in hard-to-reach locations. Since the transaction size is small, the cost of funding becomes high and unviable.
A finance company lending small sums of money to the poor so they can work their way out of poverty is referred to as a Microfinance company. Microfinance companies active across Asia and the Pacific have been helping low-income families stabilize their cash flows from income. During times of crisis, a Microfinance company helps borrowers cope and build. In good times, they allow them to grow their business and prosper.
How Does Microfinance Help the Economy?
Here are five ways in which Microfinance companies help poor communities across different regions
Empowering Women by Financing MSMEs
Many micros, small and medium enterprises are owned and run by women, and providing them with financial support helps them improve their income and livelihood. In many Asian countries, especially Pakistan, MSMEs account for most enterprises. The microfinance companies help provide long-term financing for women to develop their businesses.
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