Chapter I

1. What Is Microfinance?
• Microfinance, also called microcredit​ , is a type of
banking service provided to unemployed or low-
income individuals or groups who otherwise would
have no other access to financial services. While
institutions participating in the area of
microfinance most often provide lending—microloans
can range from as small as 1000 to as large as 25,000—
many banks offer additional services such as checking
and savings accounts as well as micro-insurance
products, and some even provide financial and
business education. The goal of microfinance is to
ultimately give impoverished people an opportunity to
become self-sufficient.

2. features
• Microfinance is a banking service provided to unemployed
or low-income individuals or groups who otherwise would
have no other access to financial services.
• it allows people to take on reasonable small business
loans safely, and in a manner that is consistent with ethical
lending practices.
• The majority of microfinancing operations occur in
developing nations, such as Uganda, Indonesia, Serbia, and
Honduras.
• Like conventional lenders, microfinanciers charge interest
on loans and institute specific repayment plans.
• The World Bank estimates that more than 500 million
people have benefited from microfinance-
related operations.

4. FEATURES OF MICROFINANCE
Empowerment of poorest
Delivery is normally through Self Help Groups(SHG’S)
Small loans
Incentives to grab self employment opportunities
Means to assist small enterpreneur and producer
Promoting self employment
Do not take security
Prefer savings over borrowing
Small short term loans

5. history
• The idea of microenterprises and microfinance
was developed in the late 1970s in Bangladesh as
a way to provide people in need with a way to
sustain themselves financially and economically.
Muhammad Yunus developed Grameen Bank in
1976 to provide microloan financing to
impoverished people—many of them women.
Since then, a number of organizations have
developed microenterprise programs, many
catering to people in developing nations.

6. Who Is Muhammad Yunus?
• Muhammad Yunus is a professor of economics
who was awarded the 2006 Nobel Prize in
Economic Sciences for his efforts in developing
social and economic improvements
through microcredit and microloan
operations. Most notably, Yunus founded the
Grameen Bank, which is known for loaning
billions of dollars to impoverished people all
over the world.

7. • Muhammad Yunus is an economist, microfinancing
pioneer, and founder of the grassroots Grameen Bank,
known for loaning billions to impoverished people all
over the world.
• While teaching economics in his native Bangladesh,
Yunus became aware of the extreme poverty in the
country and the refusal of banks to offer credit to poor
people.
• He responded by lending them the money himself,
confident that the very poorest could raise their own
small business activity and their station with very small
loans.

8. • The Grameen Bank today has roughly nine
million borrowers, 97% of which are women,
with a near-perfect repayment rate.

9. Advantages of MF
• Provide access to funding
• Encourage self-sufficiency and
entrepreneurship
• Manage risk
• Empower women
• Job creation
• Extending education

10. Disadvantages and Criticisms of
MF
• The deal is too small for the lender to devote
ample time and money
• As the capital is low the profits also low
• Benefits the moderate poor more than the
inadequate poor
• Impact can vary by income group
• Most of MF target women, which may result
in men requiring wife to get loans for them

11. Terminologies
• Micro Credit : It is small amount of money loaned
to a client by a bank or other institution.
• Micro Savings : These are deposit services that
allow one to save small amounts of money for
future use.
• Micro Insurance : Gives the entrepreneurs the
chance to focus more on their core business
which drastically reduces the risk affecting their
property, health or the ability to work.

12. • Micro leasing : For entrepreneurs or small
businesses who cant afford buy at full cost
they can instead lease equipment, machinery,
vehicles. Often no limitations of minimum cost
of the leased object.
• Money transfer : These are transfer of funds
from people in one place to people in another,
mainly across borders to family and friends.

13. What Is Microcredit?
• Microcredit is a common form of microfinance
that involves an extremely small loan given to
an individual to help them become self-
employed or grow a small business. These
borrowers tend to be low-income individuals,
especially from less developed countries
(LDCs). Microcredit is also known as
"microlending" or "microloan."

14. features
• Microcredit is a method of lending very small
sums to individuals to start or expand a small
business.
• Microcredit borrowers tend to be low-income
individuals living in parts of the developing world;
the practice originated in its modern form in
Bangladesh.
• Most microcredit schemes rely on a group
borrowing model, originally developed by Nobel
Prize winner Muhammad Yunus and his Grameen
Bank.

15. What Is a Microenterprise?
• The term microenterprise, also known as a
micro business, refers to a small business that
employs a small number of people. A
microenterprise usually operates with fewer
than 10 people and is started with a small
amount of capital advanced from a bank or
other organization.

16. • Microenterprises are small businesses that
employ a small number of employees—
usually fewer than 10 people.Microenterprises
are financed by microcredit, a type of credit
facility given to people who have no collateral
credit history, or employment.These
businesses help improve the quality of life for
people in developing countries, and generally
provide a good or service in their
communities.