A micro loan is a small, generally collateral free business or finance loan of a short-term provided to individuals for smaller financial requirements.
They are typically offered to low-income group individuals, micro-entrepreneurs, and self-employed professionals who have limited access to financial and lending entities. Their primary objectives include promotion of startups, female entrepreneurship, socio-economic development, and self-help groups.
Interest rates of micro loans are usually higher than other types of loans. However, they require minimal paperwork and grant prompt access to money.
Private limited companies, Micro Finance Companies (MFIs), and NGOs are common micro-lenders.
Benefits of Micro Loan
Ease of access: Micro Loan services focus on financial inclusion. They cater to unbanked and underbanked, weaker economic sections to allow them easy and immediate access to credit.
Improved loan repayments: Micro Loans boast improved loan repayments by alleviating poverty and financially empowering income generating individuals and businesses.
