The Future of Microfinance

It’s a Challenging Industry Although it caters to an undeserved market of people who don’t have credit or banking histories, these individuals are also usually high-risk borrowers because they are generally poor. Some independent lenders use this as justification for extreme interest rates on small loans despite the reality that it is forcing people into a cycle of debt, in which they are forced to keep borrowing to stay ahead of their interest payments. While it is understandable that lenders need to make lucrative business decisions, there are ways in which efficiency can be brought into the business of microloans, without the borrower unduly suffering.

Working Together to Make Loans Work According to Smita Ram, co-founder of Rang De, an Indian micro lending platform, the industry can balance scalability with sustainability through business mentoring. Since working closely with its borrowing communities, Ram’s company noticed that borrowers are often unsure of how to use finance effectively, and become trapped in a cycle of economic insecurity. Rang De has implemented a range of initiatives to combat this issue. While it’s not always possible for even qualified lending organizations to take a step back to assess how the loan is impacting someone, it is possible to strive towards providing financial literacy and customized loan products - which may also result in reduced risk.

Affecting Lasting Change Going forward it is vital for developing countries like Myanmar to provide supportive financing services to its people with the aim of upgrading their lives. It is important to create awareness of available services, which is why Rang De has made financial literacy kiosks available in communities with the aim of facilitating financial education. Only through taking positive action like this can microfinance companies become part of the financial progression of developing countries. Source Here