Micro finance is a term that refers to different financial services. The target groups of these financial services are usually people who have lower incomes. Thus, these people don’t have the opportunity to access to the variety of other financial services. Different services that have been offered by micro finance institutions are usually smaller monetary amounts. These products include insurances, loans, savings and fund transfer.
Those who promote micro finance and its services claim that the main goal of these financial services is to offer to the poor the access to a variety of quality financial services and in order to help them get out of poverty. They also believe that this is a sustainable means of economic development through the support of small business.
Micro credit is one of the main services of micro finance. This is the provision of loan services that is offered to poor people as well as people with lower incomes.
People meet these needs usually using a variety of different products provided by micro lending finance network. The others use the financial services such as savings and insurances in cases when they want to safe their money for the future or for the old age or to simply have the protection against risk.
Micro-entrepreneurs and small-business usually use loans to overcome financial obstacles while building or expanding their business. Financial services for entrepreneurs and small-business usually include: micro loans, short-term loans, capital access revolving loan, insurance and order based loans.
According to the promoters of such financial services, it is all for the sake of poor people and their main goal is to help people working their way out of poverty. But high interest rates on loans are not supporting this story.Generally, the higher the risk for micro finance institutions, the higher interest rates.
Before going into types of micro-lending networks and their characteristics I will say few words about micro-lending.
Micro-lending is also known as peer-to-peer lending and it represents lending of smaller sums of money without financial intermediary. Most of these lending are unsecured personal loans and they don’t have collateral.
Now enough about common knowledge and let us focus on why we are here. Micro-lending finance network is known as institutional network and within itself we have two networks, focal network and principal network