Without Microfinance, financial freedom of many people would have been trapped in the restricted access of bank loans. The ultimate object of Micro finance is to gain government’s approval to allow institutions operate as licensed rural bank owned by the community and managed by the board. The bank provides the community with viable access to savings and credit facilities.
In every institution that offers micro credit, anyone who wants to participate will need to have a good understanding of the institution’s vision, commitment, principles and methodology. In some instances, a training session is usually organized to enable participants receive credit.
Most Credit institutions required their participants to save before participation could be approved. They are often encouraged to cultivate the habit of saving to enable them mitigate risks and create a secure future.
At times, a minimum saving deposit of 10 percent of the applied loan is required as saving priority to access credit. Most credit institutions rely on solidarity groups to mitigate risk. Usually 5 – 15 people; more or less are required for loan disbursement in some cases.
The beauty of Microfinance is that the community in collaboration with the institution determines annual rate of interest for loans. Loan terms are mostly for one year and vary in some others institutions. Importantly, all loans are required to be used for income-generating activities such as animal husbandry, food processing, small business trade, trade ventures, farming, etc.
Microfinance plays a major role in helping individuals in a community create more wealth for themselves and the community. Indeed, Micro-finance is an alternative bank funding.