Present in all parts of the world, microfinance can be seen as a key cog in the wheel which aims to provide financial inclusion in the form of affordable financial products, these products are not only limited to credit like personal loans and credit cards but also to in other products such as savings, fixed deposits, and other banking services. It is one of the ways in which all-around economic development can be achieved.

The most accepted and broad definition is one that defines microfinance as a micro-credit offered to the unemployed and those who get minimum wages as salaries. The institutions which participate in this system of microcredit are called microfinance companies.

What are the different type of loans that are given through Microfinance companies?
  • women to increase their income generation
  • loans for homegrown entrepreneurs
  • emergency medical loans
  • home improvement loans
  • home extensions/ business improvement loans

It has been seen that now loans which are of a higher amount have been given to the groups that depend on microfinance companies. Even appliances like mobile phones which are essential for their business have been bought using loans from microfinance companies.

Credit Score and Microfinance

While most microfinance lend to those who at most times might not have a credit score, there is a huge opportunity for the target groups of being inducted into the credit system by opening bank and eventually loan accounts and build a credit score. Getting into the credit system is the only way true financial inclusion is possible, this is still in its early stages with initiatives like the Jan Dhan Yojana. There is no doubt about the importance of the role of microfinance companies in getting more people to experience credit.