Microfinance provides small business owners, entrepreneurs, and people living in underdeveloped parts of India with loans, credit, insurance, savings accounts, and money transfers. Microfinance is primarily used by those who lack access to these conventional financial resources.
There is a general difference in interest rates between microloans and traditional personal loans provided by the various Micro financing companies.
Why is it beneficial?
We have a population with a savings rate of almost half. Financial services are necessary for this segment to fulfil its aspirations, such as building assets and reducing risk. Financially underserved individuals have access to capital through microfinance from Micro financing companies. Microfinance institutions would have had to borrow money from friends and family if they had not offered loans to this segment of society.
There is also a high probability of opting for payday advances or fast cash loans (exorbitant interest rates). The government’s vision of financial inclusion aligns with Micro financing companies’ role in helping these groups invest wisely in their businesses.
Tips on improving your chances of getting microfinancing.
Check up all eligibility criteria.
In order to qualify for an MFI loan, you must meet the following criteria:
- You shouldn’t have borrowed from other MFIs
- The amount of your pending loan should not exceed Rs.1 lakh
- You should have a steady income as a working professional
- During the submission process, all the necessary documents should be available
- You should open a bank account.
Make sure you have all documents
You will need to have these documents if you wish to take this loan:
- Completed application form
- Passport copy
- PAN card copy
- Address proof
- Bank statement for the past six months
- Passport-sized photographs
Keep track of the interest rates
As microfinance institutions (MFIs) are more expensive to operate than traditional banks, their rates of interest are higher. Moreover, rural residents often apply for MFI loans, which leads to higher operating costs, export finance, and, thus, higher interest rates.
Follow the application process thoroughly
You can apply for a microfinance loan or export finance by going to the microfinance institution’s official website, which provides a link to the application form. Make sure the application is completed, and all required documents are submitted.
Your loan amount will then be disbursed to your bank account once the company verifies the documents. By submitting the required documents, you can also apply for a loan at the branch of the microfinance company nearest you.
Re-evaluate if you require funding at the moment
As a final point, many business owners believe they need funding to get their business off the ground. Consider ways to cut costs rather than going into debt for expenses you might not need immediately. The intended goal is to prevent too many debts from building up.
This is relatively easy with today’s digital landscape. For example, consider whether you need a storefront to sell your products or services or if you could do the same online instant. In other words, you could easily save cash on rent, storefront purchases, etc. Think about how your export finance may improve or reduce your overall bottom line.
For instance, consider your options for working from home, running your own business, or hiring contractors. You can avoid paying for full-time employees and opening an office by doing this.