What is microfinance?
Microfinance is a financial service aimed at providing small loans, insurance, and other financial tools to individuals and small businesses, particularly those in low-income groups who lack access to traditional banking services. In India, microfinance has played a pivotal role in promoting financial inclusion, especially in urban and semi-urban regions.
Bajaj Finance offers secured loan solutions, including loans against property, to empower entrepreneurs and small business owners. These loans come with easy eligibility criteria, minimal documentation, and quick disbursal, often within 72 hours* of approval. Eligible applicants can avail of loans up to Rs. 10.50 crore*, which can be utilized for various business and personal expenses.
What is microfinance?
Microfinance is a popular term associated with lending instruments for those who belong to low-income groups. Microfinance definition refers to the provision of financial lending services to individuals who lack access to traditional banking services. Financial institutions in India offer financing options to those residing mainly in urban and semi-urban regions.
Microfinance is a type of loan, credit, insurance, and money transfers are provided to small business owners and entrepreneurs.
Those who own property can opt for the Bajaj Finserv Loan Against Property for all business and other expenses.
Benefits of Microfinance Loan on property
- With the microfinance loan’s easy eligibility and minimum documentation requirement, the loan process becomes hassle-free and one can get money in their banks in 72 hours* from the time of loan approval
- Avail microfinance loans on property of up to Rs. 10.50 crore*
- Loan tenure is short
Features of microfinance loan
Small loan amounts: Provides accessible funds for low-income individuals or small business owners, usually starting from a few thousand rupees.
Collateral-free: Most microfinance loans do not require any physical collateral, making them easier to obtain.
Flexible repayment: Offers convenient repayment options, often in weekly, fortnightly, or monthly instalments.
Quick disbursal: Loan approval and disbursal are usually fast, sometimes within 72 hours*.
Financial inclusion: Targets individuals without access to traditional banking, promoting financial empowerment.
Low documentation: Minimal paperwork is required, such as ID proof, address proof, or bank statements.
Small interest rates: Interest rates are generally affordable, considering the target group and loan amount.
Group lending option: Some loans are extended via self-help groups, enabling collective responsibility.
Micro finance loan eligibility criteria
- CIBIL score: 700 or more
- Residing Indian citizens
- Between 25 years and 85 years of age
- Able to prove a steady source of income
**Age at the time of loan maturity
History of Microfinance
Microfinance in India began in the 1980s, inspired by models like Grameen Bank. The initial focus was on rural areas where access to credit was limited. In 1992, the Self-Help Group (SHG) model was introduced, allowing rural women to form groups for collective savings and loans. The National Bank for Agriculture and Rural Development (NABARD) played a key role in promoting microfinance through SHGs and linking them with formal financial institutions. Over time, microfinance expanded, with numerous NGOs and microfinance institutions (MFIs) emerging to provide small loans, savings, and insurance to certain populations, especially in rural India.
Microfinance Interest rate
Micro loans come with nominal interest rates and no hidden charges.
Types of Microfinance
Microfinance encompasses a variety of financial products designed to support low-income individuals and communities. Below are the key types of microfinance:
1. Microloans (small loans):
These are small, short-term loans provided to low-income borrowers to help them start or expand small businesses.
2. Micro-savings:
These savings accounts allow individuals with low incomes to save small amounts of money. They often have low or no minimum balance requirements and are designed to promote financial security.
3. Micro-insurance:
Provides affordable insurance options, including health, life, and crop insurance, to protect low-income individuals against unexpected financial setbacks.
4. Group lending:
A model where borrowers form small groups, often with a joint liability structure. It promotes social collateral by leveraging peer pressure to ensure timely repayment.
5. Financial literacy and education:
Microfinance institutions often provide training and education to help individuals understand financial management, budgeting, and debt repayment.
How can you use microfinance?
As you know what microfinance is now, utilize it to expand your business and boost its capacity by investing in –
- Purchase of equipment that attracts high value
- Buying vehicles necessary for the business’ operation
- Renovating the existing space of the company’s operation
- Buying a new office space
- Investing in hiring more qualified staff
- Meeting training costs
Those who own property can opt for the Bajaj Finserv Loan Against Property for all business and other expenses. This secured loan comes with attractive features like competitive mortgage interest rates, flexible tenor, swift loan processing, and more. Additionally, you can use our Loan Against Property EMI Calculator to plan your loan cost-effectively before you finalize the terms. Eligible applicants can get approved for up to Rs. 10.50 Crore* to meet all business-related expenses.
To get started, check the eligibility criteria and documents required. Once you’ve met our easy requirements, apply online and get access to funds quickly and conveniently.
How to apply for microfinance loan?
Check eligibility: Ensure you meet the lender’s criteria, such as age, income source, and business or personal requirements.
Choose a lender: Research microfinance institutions offering loans with flexible terms and fast approval.
Prepare documents: Gather identity proof, address proof, bank statements, property papers (if collateral is needed), and business or income records.
Fill application form: Complete the lender’s application online or offline with accurate personal and financial details.
Submit documents: Upload or submit the required documents for verification.
Credit assessment: The lender evaluates your repayment capacity, credit history, and collateral (if any).
Approval and sanction: Once approved, you receive a sanction letter specifying loan amount, interest rate, and tenure.
Frequently asked questions
Microcredit is a core component of microfinance, providing small loans to individuals in low-income communities who lack access to traditional banking. It enables entrepreneurial activities, empowering individuals to improve their financial stability and lift themselves out of poverty.
In India, the average loan size in microfinance typically ranges between Rs. 10,000 and Rs. 50,000. These loans are usually provided to individuals or groups for income-generating activities, such as small businesses, farming, or trade. The loan amount can vary depending on the lender, the borrower's needs, and the region.
Microfinance loans are generally unsecured, meaning they do not require collateral. Lenders rely on borrowers' trustworthiness, social pressure, and group lending models for repayment, rather than traditional forms of security-like property or assets.
Yes, several governments support microfinance through subsidies, funding, and regulatory frameworks. These programs aim to promote financial inclusion, reduce poverty, and stimulate economic growth by providing access to credit for underserved populations, especially in developing nations.
Microfinance can be sustainable for long-term economic development, provided it focuses on responsible lending, financial literacy, and supporting entrepreneurship. However, challenges such as high-interest rates and over-indebtedness can undermine its effectiveness if not properly managed.
Yes, microfinance can help individuals build credit history by providing access to small loans and establishing a track record of repayment. This allows borrowers to gradually improve their creditworthiness, making it easier to access larger loans in the future.
