Microcredit addresses the fact that the self-employed, business start-ups and small enterprises need access to credit. It has a particular focus on, but is not restricted to, groups with limited access to the conventional credit market. Examples include female entrepreneurs, young entrepreneurs, entrepreneurs belonging to a minority group, entrepreneurs with a disability, sole traders, etc. Some Institutions are reluctant to give loans to the poor because they believe the poor are not bankable and will not return the loan, MHB provide solutions for such market segment.
Microfinance and Financial Inclusion
Low-income people are neglected by their financial systems because they are considered uneconomical to serve or too difficult to reach. According to the World Bank’s Global index, 1.7 billion adults globally are financially excluded, living without formal credit or savings.
Microfinance seeks to address the needs of the unbanked by fostering economic justice and financial inclusion for all.
WOMEN WITH ACCESS TO A RANGE OF APPROPRIATE FINANCIAL SERVICES ARE MORE LIKELY TO DEVELOP SUSTAINABLE LIVELIHOODS, INVEST MORE IN HEALTH AND EDUCATION AND INTERACT WITH AND BENEFIT FROM MARKETS.
Benefits of microfinancing
Banks simply won’t extend loans to those with little or no assets, and generally don’t engage in the small size of loans typically associated with micro-financing.
Micro-financing is based on the philosophy that even small amounts of credit can help end the cycle of poverty. Many women and girls have trouble accessing formal financial institutions as they don’t have appropriate identification or certification of land and house ownership.
BETTER LOAN REPAYMENT RATES
Microfinance tends to target women borrowers, who are statistically less likely to default on their loans than men. These loans help empower women, and they are often safer investments for those loaning the funds.
EXTENDING EDUCATION AND HEALTH
Families receiving microfinancing are less likely to pull their children out of school for economic reasons and more likely to have resources to pay for school fees or health services.
Even a small working capital loan of TZS 250,000/= can be enough to launch a small business in a developing country that could help the individuals pull themselves and their family out of poverty. These small businesses can help create new employment opportunities, which has a beneficial impact on the local economy.
IMPROVED INCOME AND NUTRITION
Through small loans women are able to get needed agriculture inputs such as improved seeds and fertilizers to increase productivity and nutritional content of crops and generate more income from the market.