How Microfinance is Helping Poor Households in Fighting Poverty: Things to Know

    Most banks and financial institutions are shy of lending to low-income households, rural women, and small businesses as they consider their high-risk profile and high-cost transactions. The reason is that these borrowers are found in hard-to-reach locations. Since the transaction size is small, the cost of funding becomes high and unviable.




    A finance company lending small sums of money to the poor so they can work their way out of poverty is referred to as a Microfinance company. Microfinance companies active across Asia and the Pacific have been helping low-income families stabilize their cash flows from income. During times of crisis, a Microfinance company helps borrowers cope and build. In good times, they allow them to grow their business and prosper.

    How Does Microfinance Help the Economy?

    Here are five ways in which Microfinance companies help poor communities across different regions

    • Empowering Women by Financing MSMEs

    Many micros, small and medium enterprises are owned and run by women, and providing them with financial support helps them improve their income and livelihood. In many Asian countries, especially Pakistan, MSMEs account for most enterprises. The microfinance companies help provide long-term financing for women to develop their businesses.

    • Delivering Finance as Well as Education Access to Rural Women

    Microfinance companies help rural women to achieve financial independence and empower them to make the right decisions. In countries like China, 45% of the rural population has no collateral or education to arrange for finance. Microfinance companies give microcredit to poor rural households and provide measures to women borrowers to improve their skills and literacy.

    • Helps to Rebuild Livelihood for Women Post Conflicts

    Communities, especially women, are affected by armed conflicts and disparities in the regional economy. In certain parts of the Philippines, decades of conflict and economic stagnancy have led to lower income below the national average. Some of the largest Microfinance companies are focusing on micro-enterprises owned by women to rebuild their economic base and improve livelihood.



    • Importance of Microfinance for Small Businesses Outside Capital Cities

    Small businesses in small regional towns require working capital to help them with their operations and invest in technologies for business growth. Places like Georgia have a 60% population living in rural areas and secondary towns where agriculture and small business helps to create jobs and increase incomes.

     

    • Nurturing MSMEs to Grow and Diversify Economies.

    In countries like Mongolia, MSMEs account for 90% of the businesses and generate around 50% of all jobs despite the country having natural resources. To help small businesses, microfinance companies, with financial support from financial institutions, can create long-term stable financial support, providing new business opportunities and more jobs and helping the Mongolian economy.

    Conclusion

    Microfinance has played a crucial role in filling in the gaps for marginalized households, which powerful institutions that control “capital” have not done. A book by Ananya Roy, “Poverty Capital Microfinance and the Making of Development”, focuses on those who manage poverty.



    RELATED ARTICLES

    trading

    The Future of Trading: Embracing 3-in-1 Accounts for Financial Growth in India

    India’s retail investment landscape has undergone a massive transformation in the last decade. From being...
    www.jaalifestyle.com login

    JAA Lifestyle Login for New Users at www.jaalifestyle.com

    In the present digital age, which is very much a connected world, you see that...
    markets

    Sheldon Burnett: From Local Markets to Global Trade

    Understanding your backyard can be the first step into international markets. Rethinking What It Means to...
    Crypto30x.com Ocean

    Crypto30x.Com Ocean 2025: Smart Trading Made Simple

    In the swiftly evolving global of blockchain and decentralized finance (DeFi), Crypto30x.com Ocean emerges as...
    xrp price prediction 2030

    XRP Price Prediction 2030: Charting a Course Through Uncertainty

    Figuring out the xrp price prediction 2030? It’s a real puzzle. You've got all these...
    crypto30x.com tnt

    Crypto30x.com TNT: Unleash the Power of 30x Leverage!

    Feeling stuck with minimal crypto gains? Tired of watching small market movements yield insignificant profits?...
    Telegram group link

    Telegram Group Link: 100+ India’s Top Channels, Join Now!

    Telegram group link, a phrase many have typed into search bars, often leads to a...
    Filmy4web Mp4moviez

    Filmy4web Mp4Moviez: The Rise and Risk of Free Movie Downloading Sites

    In today's digital age, leisure is just a click away. From worthy Netflix series to...
    social media

    The Best Times and Tactics to Attract More Social Media Followers

    A big social media following needs planning, timing, and interaction rather than only consistent content...
    trading

    The Future of Trading: Embracing 3-in-1 Accounts for Financial Growth in India

    India’s retail investment landscape has undergone a massive transformation in the last decade. From being...
    compliance

    What Your Business Needs to Know About The Rise of Compliance-as-a-Service

    Digital transformation is rapidly increasing with a 23.9% annual growth rate from 2024-2030, according to...