Microfinance: concept, objectives, security
Microfinance is a type of activity associated with the provision of certain financial services to small businesses. At the same time, it is supposed that small companies will have maximum free access directly to the source of financing.
The purpose of modern microfinancing is to create the most dynamic and efficient lending system for small companies to further stimulate production, as well as distribute services and goods. Besides, one of the tasks is to help novice business people.
This is what they call a somewhat flexible form of bank lending, which makes it possible to start a business without problems, without any starting investments and credit histories. Also, microcredit, having rational principles, helps to solve problems at once:
- Increase the number of businesspeople.
- Create a credit history to finance the development of small businesses with the help of the banking sector.
Microfinance organizations do not prejudice investments and are ready to offer their assistance to entrepreneurs, thus complementing the services of financial institutions. Bank conditions are often unrealistic for a novice business person. And microfinance institutions make small financial transactions unattractive to banks.
Microfinance programs that are beneficial for small businesses are ready to offer:
- Specialized institutions – engaged in the lending and can be financed from external sources.
- Credit unions – organizations, created to provide financial assistance to their members. As a rule, they are fully funded through equity participation or members’ savings. They do not have access to any external sources of financing.
- Business Support Funds.
- Agricultural consumer credit cooperatives. Such organizations work with farmers and agricultural-related enterprises.
Such programs are often implemented through special municipal and state small business support funds.
Internet financial transactions
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