Microloans are small, short-term loans aimed at supporting self-employed individuals, startups, and micro-enterprises by offering easy access to capital without the lengthy procedures of traditional bank loans. They play a vital role in providing financial assistance to low-income groups and micro-entrepreneurs who are often excluded from mainstream banking services. In India, initiatives led by the Reserve Bank of India (RBI) and the Government have significantly widened access to microloans, strengthening financial inclusion and encouraging entrepreneurship. This guide highlights the key features, benefits, eligibility, and application process of microloans, while explaining how they help individuals expand businesses, create livelihood opportunities, and contribute to economic growth.
What is Micro loan
Microloans are small-value, short-term loans designed to meet the financial needs of self-employed individuals, startups, micro-enterprises, and small businesses with limited capital requirements. These loans are especially beneficial for low-income groups and micro-entrepreneurs who typically lack access to formal banking or traditional lending channels. To explore your options for financial support, you can check your business loan eligibility before applying.
To bridge this gap, the Reserve Bank of India (RBI), with support from the Government of India, has encouraged initiatives aimed at extending credit to the unbanked and underbanked sections of society. This has been made possible through collaborations with private limited companies and other financial institutions to enhance financial inclusion across the country.
Features of micro loans
-
Flexible repayments
To repay your loan amount, you can choose from tenure of up to 96 months to repay your loan amount.
-
High-value loan amount
Get a high-value loan amount of up to Rs. 80 lakh upon meeting the eligibility to meet all your working capital requirements.
-
Loan in account in 24 hours*
Upon filing the application and getting loan approval, you can receive the loan amount in your bank account within 24 hours*.
-
Choose a Flexi Loan to lower your EMIs
You can lower your EMIs by up to 45%* on EMIs through the Bajaj Finserv Flexi loan facility. Withdraw money from a pre-set amount and pay interest only on that amount.
-
No security
Get easy loans without collateral, meaning you will not have to pledge any asset while availing of a loan from us.
Benefits of micro finance
Some of the benefits of microfinance are:
- It helps start or expand businesses, increase income, and create jobs.
- It empowers women to become more independent, confident, and socially active.
- It improves well-being of the borrowers and their families.
- It fosters financial inclusion and literacy among the marginalised sections of society.
- It contributes to the economic development and poverty reduction of the communities and countries where it operates.
Purpose of micro loans
- Poverty Reduction: Microloans can be a powerful tool for poverty reduction by enabling individuals to become self-employed and increase their income.
- Entrepreneurship Promotion: They support the growth of small businesses and micro-enterprises, fostering entrepreneurship and economic development.
- Financial Inclusion: Microloans help integrate marginalised populations into the formal financial system by providing access to credit and other financial services.
- Community Development: By empowering individuals and communities, microloans can contribute to broader social and economic development.
Characteristics of micro loans
- Small Loan Amounts: Micro loans involve relatively small amounts of money, often ranging from a few hundred to a few thousand dollars, depending on the context.
- Targeted at Low-Income Individuals: They are specifically designed to support individuals who may not qualify for traditional bank loans due to factors like lack of credit history, collateral, or formal employment.
- Focus on Income-Generating Activities: The loans are typically intended for activities that can generate income for the borrower, such as starting a small business, purchasing equipment, or managing working capital.
- Flexible Repayment Terms: Repayment schedules are often tailored to the borrower's income patterns, making it easier for them to repay the loan without undue hardship.
- Often No or Minimal Collateral: Unlike traditional loans, microloans may not require significant collateral, making them more accessible to those who lack assets.
Eligibility criteria for micro loan
Getting a micro loan from us is hassle-free and convenient. You just need to meet the following eligibility parameters:
-
Citizenship
Indian Resident
-
Age
Between 24 and 80 years*
(*age should be 80 years at the time of loan maturity) -
CIBIL Score
685 or more
-
Business vintage
Minimum of 3 years
Documents required for micro loan
- KYC documents - Aadhaar/ passport/ voter’s ID
- PAN card
- Proof of business ownership
- Other financial documents
Interest rate and charges on micro loan
Before applying for a micro loan, it is important to understand the cost involved. Lenders generally charge interest based on factors such as the applicant’s profile, repayment capacity, and loan amount. To make an informed choice, you can check the applicable business loan interest rate and compare it with other financing options.
Along with the interest rate, borrowers may also need to account for processing fees, documentation charges, and late payment penalties, depending on the lender’s terms. To plan better, use the business loan EMI calculator and estimate your monthly instalments in advance. This helps manage cash flow efficiently and ensures timely repayment of the loan.
Micro Loan interest rate and charges
Typical interest rates for microfinance loans vary within a set range depending on the lender and borrower profile:
Interest rate type |
Rate |
Minimum rate |
21.25% |
Maximum rate |
26.00% |
Average rate |
22.17% |
How to apply for a Micro Loan online
To apply for microfinance loan, simply follow these steps:
- Click on the ‘CHECK ELIGIBILITY' button on this page.
- Enter your 10-digit mobile number and OTP.
- Fill in the application form with your basic details, such as your full name, PAN, date of birth, and PIN code.
- Once you enter all your details, please click on ‘PROCEED’ to visit the loan selection page.
- Enter the loan amount that you need. Choose from our three business loan variants – Term, Flexi Term, and Flexi Hybrid.
- Choose the repayment tenure – you can select tenure options of 12 months to 96 months and click on ‘PROCEED’.
- Complete your KYC and submit your business loan application. Before submitting, don’t forget to check your pre-approved business loan offer to expedite the approval process.
Frequently asked questions
A micro loan is a small loan typically provided to individuals or small businesses that have limited or no access to traditional banking services. It is often used in developing regions to support income-generating activities.
An example of a micro loan could be a Rs.50,000 loan granted to a local vendor to expand their stall or to a tailor for purchasing a sewing machine. These loans are small in amount and designed to help kickstart or grow micro enterprises.
Micro loans usually come with a cap, depending on the provider. In India, the limit is often up to Rs.1 lakh, while globally, it can range up to around $13,000. The aim is to meet modest capital needs of small business owners.
