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  • Anjali Verma

The Importance of Microfinancing for Small Businesses

Table of Contents:

Meaning

Example of microfinance

How does it work?

Benefits

Top microfinance companies in India

Conclusion

India's economy has been growing over the past several years, and microfinance organizations have significantly contributed to the reduction of poverty, particularly among women, rural youth, and the poor, by pulling them out of poverty and providing them with official credit channels. According to a current report from Sa-Dhan, an RBI-recognized self-regulatory organization (SRO) for microfinance institutions, India's microfinance business saw growth of over 13 percent in the last quarter of the fiscal year 2021–22, while the industry's year–over–year (YoY) growth was at 5 percent (MFIs). In India, the idea of microlending has become incredibly popular, and hundreds of microfinance organizations are reshaping the financial lending landscape for the underprivileged.


Meaning

Microfinance is the term used to describe the provision of financial services to low-income people or groups that are generally shut out of regular banking. The majority of microfinance organizations concentrate on providing credit in the shape of modest working capital loans, sometimes known as microloans or microcredit. While regulated microfinance banks offer savings accounts, many also offer insurance and money transfers.

To encourage self-sufficiency, microfinance strives to increase the accessibility to financial services for underserved populations, particularly women and the rural poor.


What are the examples of microfinance?

  • Group Loans

  • Agriculture Loans

  • Individual Business Loans

  • Insurance

  • Energy Loans


How does it work?

Microloans, micro-savings, and microinsurance are all included under the cover term "microfinance." Microfinance organizations help business owners and entrepreneurs launch their ventures by offering small loans and other resources. Since many of the borrowers are from underdeveloped nations, they would not typically be able to get a loan.

Micro savings accounts are included in the definition of microfinance. They permit business owners to maintain savings accounts with no minimum balance. These borrowers can get insurance from 4 Microinsurance at a cheaper rate and with lower premiums.


Benefits

  • People can better support their families as a result.

  • It makes credit available to consumers.

  • It benefits those who are generally overlooked by society.

  • In comparison to conventional banking products, it provides a higher overall loan repayment rate.

  • Families are given the chance to provide their kids with an education thanks to it.

  • Future investment opportunities are made possible by it.


Top microfinancing companies in India

The following are the top microfinance companies in India.

  • SKS Microfinance Ltd

  • Spandana Sphoorty Financial Ltd

  • Share Microfin Limited

  • Asmitha Microfin Ltd

  • Shri Kshetra Dharmasthala Rural Development Project

  • Bhartiya Samruddhi Finance Limited


Microfinance and SynoFin

Microfinance institutions are rapidly growing due to the huge demand for credit from underserved urban and rural communities. To compete with large banks, microfinance institutions must leverage readily available technology to expand their reach, modernize their processes, and accelerate response times.

The SynoFin microfinance software solution is a powerful and adaptable platform created for operational simplicity that aids in the automation of business and microfinance institution procedures.


Why choose SynoFin for a MicroFinance Loan?

We ensure you are using the latest, secure, and scalable solutions that can automate the entire process of offering various financial services to small scale, individuals, or groups.

  • Highly Interactive user interface and enhanced customer experience

  • Real-time processing timelines

  • Paperless loan origination and onboarding of customer

  • Improved Operational efficiency due to integrated Solution

  • Powerful reporting structure and customer analytics

  • Integrate multiple application programming interfaces in the software

  • Multiple interest computation mechanism

  • Risk mitigation with improved visibility

Visit the SynoFin website to know more: https://www.synofin.tech/


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