Role of Microfinancing

 Written by..

 Malik Hyder waseer..

Here's a comprehensive overview of microfinancing and its impact on rural communities:

    Role of Microfinancing...

Microfinancing operation involves around  the provision of small loans, savings, remittance & deposits etc..financial services target the those underprivileged and Less developed areas where individuals don't have access to get loan from banks to fullfil their financial needs i-e agriculture, livestock and enterprises..

This community doesn't access to other traditional banks.. Because such community can not fullfil the basic requirements of these banks ,So they have to reach out to microfinance banks and MFIs as well, for fulfilling their financial needs..

Microfinance banks & microfinance institutions ( NGOs) target low income rural based community..

Microfinance institutions conduct capacity building sessions with their target community..

 Impact of Microfinancing on Rural           Communities....

Microfinancing provides small loan to rural communities, enabling them to invest this loan into your businesses, agriculture and livestock for the development of these segments..

            Alleviation of poverty: 

By providing financial services, microfinancing can play pivotal role for  eliminating poverty, Borrowers utilize this loan into their businesses and increase their income..

    Microfinancing &  Agriculture.. 

Microfinancing enables farmers to invest in their agricultural activities, like purchasing of high quality seeds, agriculture machinery and solar system for irrigation. Fertilization and pesticides and improve crops productivity.

By doing so they can easily pay back to bank and improve their financial condition..

But some factors impact the productivity of farming, like weather, pests, and diseases.

These factors disturb farmers agriculture income and resulting he can not pay back to bank..

   Microfinancing & Dairy Development..

Microfinancing can play very important role for the development of dairy & livestock Segment..

Farmers can avail loan against their Dairy & livestock Businesses aiming the development of this business..

Farmers can avail loan facility in the shape of individual and in group as well, Both are eligible for taking loan but important is that must have repayment capacity..

Farmer can avail loan facility for purchasing animals, animal shed renovation, vehicle and feed etc..

Loan can be used for the better health of livestock..

 Risk associated with livestock Business.. 

Livestock business has high risk, farmers may default on loans due to factors like disease outbreaks & market fluctuations.

Climate change may also disturb livestock productivity and income that can change the repayment behavior of farmers.

Rural Farmer has less access to market this can significantly impact the income of farmer..

Microfinancing impact on rural women..

Main focus of microfinance banks & institutions to empower society in the term of personally, socially and economically...

Microfinancing provides loan to rural women on easy and favorable terms and conditions,enabling them to start or expand their businesses, generate income and improve their livelihoods..

Microfinance Banks develop trend of savings for the better future, develop confidence level of women and enabling them to play pivotal role in community based activities...

Rural women can invest financing amount in their children's education for their better future..

         Challenges and Limitations..

 Rural women have to face some challenges for availing loan facility from microfinance institutions lack of awareness and some societal restrictions..

Challenges for microfinance institutions..

Microfinance institutions have high interest  

High interest rate increase the financial burden on low income community..high mark up rate disturbs institution and community as well..so this high rate creates problem for institutions, Resulting borrowers may default..

Microfinancing institutions depending on donor, So this factor also creates problems for institutions..

          Implemention of technology..

Microfinance Banks improving their services by implementing latest technology.

 Online payment system provides the customers easy transactions channel that is more secure and safe .enable customer to easy access to bank services as loan payment loan repayment and account related process..

These mobile banking apps increasing the trust of customers over banking industry.

Mobile banking apps mitigating fraud and other fraudulent activities in the term of transactions..

Loan Disbursement process has made more easy due to latest technology and innovation..

 Microfinance institutions should join hands with other stakeholders, including governments, funding agencies and private sector companies to expand financial inclusion, by doing this rural community can play important role in the progress of country..