Search Suggestions
- Gold Loan
- Money Transfer
- Mutual Funds

WHAT IS MICROFINANCE AND HOW DOES IT WORK?
Microfinance is a way to provide banking services to small entrepreneurs and those in need of financial support. Microfinance is intended for low-income groups, entrepreneurs, and people who need cash to grow businesses. It helps people access a range of financial services, such as loans, insurance, money transfers, and savings. The loan can be provided by a micro finance company, banks, non-government organizations, cooperative, non-bank financial institutions, or other legal-regulated entities. Microfinance loan programs come with small loan amounts, low collateral requirements, and short repayment periods.
Here is everything you should know about micro finance.
Why Is It Important?
Most small business owners, especially village-level entrepreneurs, do not have credit scores or history, so they cannot attain loans and other financial services from banks and major financial institutions. Often, low-income people have no collateral, so they cannot apply for a loan from regular banks to invest or save money for their future. The provision to apply for a microfinance loan is vital as it helps financially underserved people to access resources and capital.
History of Microfinance
The concept of microfinance was originated in the 70s in Bangladesh by Muhammad Yunus. A professor of economics, Muhammad Yunus, started giving out small loans to low-income people to boost self-employment and decrease poverty. In 1983, he founded the Grameen Bank, which is now active in more than 70,000 villages in Bangladesh. At present, the concept of microfinance is being used in several banks and private organizations to promote economic activity in developing countries.
How Does It Work?
Microfinance plays a key role in the battle against poverty by helping low-income families to work towards achieving their financial goals and ending their poverty. It helps them with the required capital to start a business and be financially independent. Many regular banks and financial institutions see low-income people as high risk and high cost for two main reasons – first, the client is from remote and hard-to-reach areas, and secondly, their transactions are small.
Micro finance is intended to break these hurdles as it allows low-income families to start businesses, stabilize their earnings and save for the future. While microfinance helps business owners to grow and succeed in good times, it helps them survive and rebuild in times of crisis. So, microfinance is being praised as a great way to end the poverty cycle, help the financially marginalized, boost earning power, and reduce unemployment in India. Overall, it can serve as an essential tool for the poor and weak segment when used properly.
Benefits of Microfinance
Access to Instant Funds
Microfinance allows low-income or unemployed individuals to get immediate funds to start a new business or find resources to grow their business. Micro finance personal loan provides financial solutions on reasonable terms and conditions to those who are ignored or considered ineligible for mainstream banking. The goal is to help the unbanked people establish or sustain a small business, tackle emergencies, and save money for the future.
Create Employment Opportunities
When small entrepreneurs take the help of microfinance to start their businesses, they create job opportunities for others in the community. The creation of real jobs is beneficial for both the poor and the local financial system, as more income is generated through local businesses and services.
Access to Loan for Neglected People
Microfinance provides funds for those who go unnoticed by regular banking services. Also, many big financial institutions and banks do not give loans to people with no income or who have little or no assets. A micro finance company or institution primarily focuses on unemployed persons, women, poor or low-income people, and those with disabilities. For small entrepreneurs, it is easier to apply for a microloan online as they are not asked to show their credit history.
Possibilities of Future Investments
Poverty can be a regular cycle for underserved people. Lack of money can lead to difficult situations like water and food scarcity, malnutrition, and illness. As a result, people cannot work and hence, shortage of money and the cycle continues. A microfinance loan is intended to break this cycle by providing funds to underserved people. Access to funds means the basic needs of life are met for poor people. Therefore, people can focus on improving sanitation, health care, child education, and productivity.
Microfinance, with its diverse aspects, including microcredit, micro-savings, and micro-insurance, can help in economic growth and poverty mitigation across the world.
Muthoot Finance is the most trusted financial services company that provides a variety of loans for entrepreneurs and small businesses. Muthoot Finance offers financial services to the masses, including underprivileged people and those living in rural regions of India. We focus on providing financial support through Muthoot microfinance loans to women engaged in small businesses.
CATEGORIES
OUR SERVICES
-
Credit Score
-
Gold Loan
-
Personal Loan
-
Cibil Score
-
Vehicle Loan
-
Small Business Loan
-
Money Transfer
-
Insurance
-
Mutual Funds
-
SME Loan
-
Corporate Loan
-
NCD
-
PAN Card
-
NPS
-
Custom Offers
-
Digital & Cashless
-
Milligram Rewards
-
Bank Mapping
-
Housing Finance
-
#Big Business Loan
-
#Gold Loan Mela
-
#Kholiye Khushiyon Ki Tijori
-
#Gold Loan At Home
-
#Sunherisoch
RECENT POSTS

Term Loan Explained: Types, Features, Pros & Cons
Know More
Understanding Financial Security: Meaning, Importance & Benefits
Know More
Flat vs Reducing Interest Rate: Which One Should You Choose?
Know More
What are Sectoral Mutual Funds? When to Invest in Them
Know More
10 Smart Strategies to Repay Your Home Loan Faster
Know More
Paper Gold Vs Physical Gold: Key Differences Explained
Know More
Investing vs Saving: Key Differences You Must Understand
Know More
Understanding How Mutual Funds Work: A Complete Guide
Know More
Top 5 Different types of Short Term Loans in India
Know More
What Is a Digital Gold Loan and How Is It Different from Traditional Gold Loans?
Know MoreFIN SHORTS

Why Digital Gold Loans Are Gaining Traction in 2025
Know More
Gold Price Forecast for the Next 6 Months
Know More
Why Travel Is Now the Top Reason for Indians to Take Personal Loans
Know More
Repo Rate Cuts, Inflation, and Your EMI: Navigating Personal Loans in 2025
Know More
A ₹10,000 SIP Could Turn into Crores?
Know More
NPS Repairs: 6 Big Reforms Everyone Should Know
Know More
4 Reasons Gold Loans Are Popular in South India
Know More
Top 5 Mutual Funds Giving Highest Returns in July 2025
Know More
How to Read Muthoot Finance Share Price Trends Daily?
Know More
Share Price Today: Key Factors Influencing Stock Market Movement
Know More
Top Performing Mutual Fund Categories in 2025
Know More
Why Gold Loans Doubled in 2025: Insights
Know More- South +91 99469 01212
- North 1800 313 1212