Does microfinance actually work?

[milewilda]

Same here in our country on which Banks would be having the lowest interest rate on which this is the best choice or option when you are trying to get up some loan but the main issue on here is that not all people would be having the opportunity on granted out some loans on which considering that the requirements for people to be eligible on getting a loan will be that tough and thats why they do end up on going into these microfinances just because they dont have any options and even despite of having that big or huge interest but still they would be needing up to deal up with it and thats the reality. Whenever you have decided on taking up some loans with these financing then make it sure that you do be responsible on repaying up those loans because interest and penalties are much more worst than with the banks. Some people do say that these institutions or companies are shit but come to think that these are that very helpful when you are having no choice or other options specially that you are in need. Does it really work? If we do speak about into those borrowers then everything will be basing up into the business that they are that trying out to do or even just that simply been that speaking about on how they would be using up those loan amount because success isnt something that you cant be able to know whether it would be able to push through or you would be failing up with those loaned amount that you had borrowed.

In my country there is not a big difference between rates offered by banks and microfinances but microfinances are more risky in giving you a loan if you are a poor person. If microfinances don't give you a loan, then there are pawnshops that are really on devil's side. I've seen lots of people with iPhones giving them to the pawnshop for 50% of its real price. The last resort, even if a pawnshop doesn't work, is an individual who illegally gives money to people but these people charge very high interest rate, twice more than what banks or microfinances charge and they are very bad people if you mess up with them.

This would be your last resort if you do saw yourself that wont be able to get approved by banks and even into micro finances on which we do know that they cant just that also give out some loan easily. You are definitely right that when it comes to interest then their differences are notable but still not that something big in compared when you are trying out to took up some loan for some individual on which it could reach through 10-20% on which this is that too absurd with this kind of interest. Despite of having these kind of interest but there are still people who do dive in or that agrees up with these terms specially if they dont have any more options or simply doesnt have the choice and they are already that in need of money or funds. Here in our place then there are tons of microfinance companies that lurking around on which this simply means or shows that there are tons of people who do avail up these loans on which they are making use of it for whatever purposes that they do. Does it actually work? For business side then it do works but to expect on every investment or business on which it will be incuring up some loses. It all matters on how you do able to sustain it out because if you are still remaining on positive then you would be still continuing the business. In borrowers perspective when it comes into borrowing up money with these microfinance then it will be that a huge help specially if you do able to utilize those money that you have asked or loaned out. Interest are normal and as long those percentages wont be that much then I dont see any issues with this. Come to think that they havent forced you to take up some lan in the first place and you are the ones who do made out such first approach in regarding on taking up a loan.

[yhiaali3]

In my opinion, microfinance differs from regular loans only in a few minor details and it may be worse in some respects. For example, regular loans can be given to anyone while microfinance loans are granted subject to certain conditions.

The worst thing about microfinance is the collateral required to be provided to the bank. Some banks in countries like mine require collateral or tangible collateral (such as property or assets). If the borrower defaults and is unable to repay on time, their assets may be at risk of being confiscated or seized.

[el kaka22]

We have literally the same thing on this forum exactly. shasan most famously is doing microloans like crazy, he gives 100 dollars, gets 110 back, gives 250, gets 280 back, if you can't pay it exactly, then he postpones and puts interest to it, and he keeps on making money that way.

I am sure there must be some people who didn't pay their loans at all, because normal banks have default rates too, so I am sure there are people who default here too, and that is understandable. But he is doing microfinancing right on this forum and you can go check and learn more about it. I do not know if he himself would be able to actually talk about how profitable or not it is, but we can be certain that he is doing a fine job running it, because it's a tough business, to do it all alone.

[harapan]

Do you think that microfinance help the poor or are there other ways to get out of poverty?

In rural communities, microfinance banks are the star banks.

Farmers, fishermen and market women and other small scale business owners all benefit from microfinance banks. They know the people in the community where they are located. They help them to support their business.

The locals know this and are dependent on them when their businesses need support. Microfinance banks remain an integral part of their community.

You're definitely correct microfinance has been a help in time especially to the needy and it's the nearest monetary value in physical form that's nearer to the people in which they can get easy access to things. But in the contrary microfinance don't actually help the poor out of poverty but it  reduces the rate of financial redundancy at which people go about limiting themselves from financial stability.

[fruktik]

Still, it is a good start for the poor to at least try and get themselves out of poverty. We know that traditional banks usually only give out loans to those who think they can actually pay back and are very strict with the money they will give. Do you think that microfinance help the poor or are there other ways to get out of poverty?

My situation in the Russian Federation with microfinance is very sad and now I will explain why.

Do you know at what interest rate money is issued in such organizations? I will answer. Almost at 300% per annum. Is it possible to get out of poverty under such enslaving conditions? A rhetorical question. On the contrary, it plunges people even deeper into a financial hole from which it is almost impossible to get out. And the situation in the economy is getting worse and more tragic every day due to the high rate of inflation risks.

[davis196]

Giving loans to broke people is a really dumb and risky business model. That's why this particular niche is dominated by "loan sharks" and other shady "payday loan" companies. Such microfinance programs cannot exist without government funding and support. The borrowers have to be monitored closely by government officials, so that it can be sure that they would try to build a fully functional small business and repay the loan. I don't have any verified info about the effectiveness of such microfinance programs. I think that the percentage of poor people becoming financially independent and repaying such loans must be extremely low.

[Tipstar]

"Microfinance refers to the financial services provided to low-income individuals or groups who are typically excluded from traditional banking. Most microfinance institutions focus on offering credit in the form of small working capital loans, sometimes called microloans or microcredit."

As someone from a country with quite a lot of poor families, the idea of microfinance is not as uncommon. However I must clarify that microfinance is different from government aid. Hence the question arises of does microfinance actually help the poor? I can say that it can be better than government aid since government aid are just money (and not much money at all) given to families to help them survive the day, the week or the month. But microfinance can help the poor get on their feet and eventually be self-sufficient. But just like with traditional banks, microfinance give out loans with interests. Though probably lower than what traditional banks offer, it can still be risky for the poor to get help through microfinance and set up a business that has no guarantee of being successful.

Still, it is a good start for the poor to at least try and get themselves out of poverty. We know that traditional banks usually only give out loans to those who think they can actually pay back and are very strict with the money they will give. Do you think that microfinance help the poor or are there other ways to get out of poverty?

Microfinance were thing of past. They took advantage of the lack of economic literacy of people in rural and remote areas. They take more interest than traditional banks and focuses on the poor and underprivileged which already is an unethical move.

Now is the time of information technology and everyone has access to internet on their hand. Be it remote or rural areas everyone has access to internet and has digital literacy. This enables banks to digitalize their service and reach to places they physically can't. Almost all of modern transactions now occurs online without cash being handed over. People are more financially literate and now they know how and where they could find cheaper loans. The procedure to take loans too is streamlined by most banks with single day loan approvals. Microfinance is dying at least in my locality.

[Gost ms]

You have raised a beautiful comment among us. Honestly, it depends on a person whether he can remove his poverty with a small loan or not. From my point of view, what I think is this. Before taking a loan, one should find a stable source of income, whether it is monthly income or weekly or daily. For example, there are many people whose income is very low but they have the ability to repay their small loans. If they want, they can save money by taking a loan from the bank and gradually repay it with the money they get from their stable income. The reason for doing this is that the income of all people is very low, at the end of the day or at the end of the month or at the end of the week, they do not have anything to save. If they save money by taking a loan and repay it with their stable income, they will have some amount of money saved.

But there are some people who do not have a source of income. If they take a loan, they will continue to be burdened with one debt after another. Because they do not have any source of income to repay their loans. So before taking a loan, find a stable source of income with which you can repay the loans.

[Smartprofit]

In my opinion, the existence of microfinance organizations is more evil than good. As is known, microfinance organizations provide loans (microcredits) to those borrowers who are not given loans by large commercial banks.

At the same time, microcredits (loans) are issued at very high interest rates. In general, in my opinion, there are a very limited number of situations when it makes sense for an individual to take out loans and credits. These are mortgages (apartments are very expensive, and young families really need their own housing) and (sometimes) education loans. In all other situations, people, in my opinion, should not take out loans (because then they will have to pay the lender not only the principal of the loan, but also the accrued interest).

For poor people, the need to pay high interest to a microfinance organization is a path to poverty.

[Zoomic]

Still, it is a good start for the poor to at least try and get themselves out of poverty. We know that traditional banks usually only give out loans to those who think they can actually pay back and are very strict with the money they will give. Do you think that microfinance help the poor or are there other ways to get out of poverty?

My situation in the Russian Federation with microfinance is very sad and now I will explain why.

Do you know at what interest rate money is issued in such organizations? I will answer. Almost at 300% per annum. Is it possible to get out of poverty under such enslaving conditions? A rhetorical question. On the contrary, it plunges people even deeper into a financial hole from which it is almost impossible to get out. And the situation in the economy is getting worse and more tragic every day due to the high rate of inflation risks.

I used to see microfinance banks as institutions that are targeted at helping the poor raise capital for their businesses, but from the replies I am seeing, I can clearly see that it is far from what I thought. I have enjoyed their services before, so I can't really say much out of experience.

Microfinance banks know that poor people are some of the most gullible and vulnerable people to do business with, so they try to get closer to them, talk to them about helping them raise capital, and in the end, milk them dry through interest rates.

Poor people need basic amenities, good job opportunities, grants, and incentives, not loan facilities that will stress them to pay back.

[Yoona_As]

There are many poor people who take loans, but there are both good and bad sides to debt. Poor people who take loans to move forward financially, if they are used to borrowing, if you are limited in your financial progress, you should definitely develop a saving habit so that you can keep your money. If the habit of borrowing is on your bad side, such as taking another loan even after not being able to repay the loan, as a result, you will not be able to move forward financially and will get stuck in this cycle of debt. Therefore, you should take a loan in a properly planned manner and use it properly.

[bitgolden]

How do you think they make money if they start giving out loans to people who are simply poor and have to start a business of their own so that they can earn a livelihood? It doesn't work that way; only NGOs can do things like that, but not businesses, especially organizations that involve financing. I have a relative who works in a microfinance bank, and he told me that they don't just give away money to poor people so that they can run businesses, but they give out small loans to groups or individuals who they know are going to do something with it, and they give these to people who they know are going to return the money, and they most probably take some guarantee for it, maybe collateral or something.

Most things in this world are presented in a way that makes people think that they are being done for the betterment of society and to help the needy, but in reality, there is always a motive behind those things that the doers are going to achieve. No one would do anything without seeing any personal benefit.

[DeathAngel]

Microfinance can work but it’s not guaranteed. For some a small loan is enough to kickstart a business or get through a tough time. It can boost confidence & offer real independence. But it doesn’t always lead to lasting change as some people end up stuck in debt. It really depends on how it’s set up & who’s running it. Done right it can make a big difference.

[jaberwock]

I used to see microfinance banks as institutions that are targeted at helping the poor raise capital for their businesses, but from the replies I am seeing, I can clearly see that it is far from what I thought. I have enjoyed their services before, so I can't really say much out of experience.

Microfinance banks know that poor people are some of the most gullible and vulnerable people to do business with, so they try to get closer to them, talk to them about helping them raise capital, and in the end, milk them dry through interest rates.

Poor people need basic amenities, good job opportunities, grants, and incentives, not loan facilities that will stress them to pay back.

Microfinance is one of the experiments which done by few big players, and they are taking good advantage even its definition and few parts are discussable but still it's not going to help end poverty in many countries even it's increasing problems for them.

As mentioned it's helpful in few regions with mostly its interest rates and few other things have never been allowing peoples those are vulnerable to develop their ways and also end their problems because it's never been part of this game which is having new names but always stay here to suck the blood of poor. If societies give basic things to poor then surely many problems will be ended, but they never want to do this because after this they could be not able to control them for their own sack just because of these having things like these which are giving them on interest.