Micro-finance are institutions that are aimed at providing financial needs to the unsalaried workers who have low varying incomes but still desire certain financial services that cannot be offered by commercial banks. According to Jude Riedy, our first classmate, she argues that microfinance alleviates poverty in rural areas. Microfinance enhances this through its ease of access in providing means for persons and big businesses to acquire credit and operate accessible assets on constant basis. Accessing financial services has greatly enabled small businesses to expand by providing starting capital with few legal formalities which pose a significant threat to young entrepreneurs. I strongly agree with the fact that MFIs (Microfinance institutions) have greatly reduced poverty in most developing countries by creating job opportunities through funding poor people who have got adequate skills and talent to venture into small businesses
Third classmate’s response: Cara Kelly. A commercial bank differs from traditional commercial banks in some ways. Micro-finance institutions is more dependable source of finance and assistance as compared to other financing sources functioning outside the microfinance industry normally form casual relationships with debtors and have no legal or considerable ties with their clients. As a result, the terms of the loan tend to carry without guarantee that financiers will stay in one place for a period. On the contrary, microfinance organizations work with government organizations and also have ties with global organizations. In addition, they also make up-to-date technologies accessible to the borrowers in terms of credit card hence they end up being more efficient in service provision than traditional commercial banks.
However, microfinance institutions have got challenges in influencing customers about the importance of the bank. Since the institutions aim at attracting new customers, they experience problems introducing new products to their customers because their financial risk is high.
Despite the stated challenges that MFIs faces in its rapid expansion, it remains to be the most efficient in both long-term and short loans, ease of access to financial services and reliable support to young entrepreneurs.
Diallo, O. (2003). The role of microfinance in the eradication of poverty and women's empowerment: Two case studies in Mali.