Microfinance is one of the emerging financial service, aimed at reaching to the lower income group of people to participate in the business growth and help in stabilizing the nation’s economy. The more the freedom to earning people, the better a nation would be proceeding towards development.
Many developing nations have now adapted to this new financial service, that helps both the lenders and borrowers equally. Crowdfunding as another new way of fundraising, microloans has also become the popular way of raising capital to small business owners.
These loans are made available to the low underdeveloped nations to help them earn a source of income, to stand on their feet. So, how is the lending made possible? Is it by a single individual or in a group as in crowdfunding? Is there any background check to have a proof of repayment?
Well, you are absolutely right. Nobody would like to lend to someone who isn’t able to repay. So, there will be a small check on the borrower’s background and their interest in the business. Microlending is made possible on the internet where many people who are interested in lending to people with talent and a good idea. The lenders come together put their savings into such small loan which is mutual helping to both the lenders and borrowers.
Benefits of micro-lending:
Microlending brings more flexibility to the lives of borrowers. The main intention of the microlending is to improve the quality of people with low income. When there is a no-income frame for a small businessman, these microloans will help in living through the rough patch, by not hindering the business, giving enough capital to invest in the business.
Technology is the backbone:
With technology developing beyond imaginations, a lender and a borrower can find clients that suit their needs easily. A lender can find the right client (borrower) to his small saving, by analyzing the data available; like the mobile phone uses, money dealings that happen, the frequency of the money transfers. The best use is that you don’t need to go hunting and researching about the people and gain interest in the savings made.
Bad credits can be discarded:
Many borrowers sometimes have a bad credit history and hence are not eligible for loans and stuff. This microlending gives them an opportunity to regain back their ability in running business, opens a new lease on life.