What are the benefits of microfinancing?

Traditionally, the poor have been unable to receive loans. That's because they don't have anything to offer as collateral. As a result, they get stuck in a vicious cycle of poverty, living and working in poor, rural areas. Should adversity strike, they simply don't have the means to combat it.

Microfinance allows the poor to get the loans they need to save, invest, and create a sustainable lifestyle of financial independence and growth. These loans are used productively by the poor to create their own businesses, grow their assets, and get out of poverty once and for all.

Thank you Adrija...Micro Finance is an utter flop in Andhra Pradesh. Micro Finance has become Multiple Financing in AP. This is to say different companies financing the same person without verifying the background of the borrower. This naturally resulted in bad debts and suicide of the borrowers. The interest charged is abnormally high - as high as 36% -Not a day passes in AP without the news of a suicide by a MFI borrower in the first page of the vernacular dailies. Government had to issue an ordinance and High Court had to intervene, political leaders are not allowed to go to villages...the situation is horrible...I am sorry, I am against Micro finance... The very idea is a failure, without proper systems and greedy companies...

MFI as a concept is very good.  But their function needs to be regularised.  They are resorting to aggressive financing. Without assessing the requirement and without assessing the repayment capacity of the borrower, they are lending money at the door step of the borrower.  The aggressive collection tactics of MFI are becoming controversial.  There are allegations that village poor are committing suicides due to the pressure tactics being practiced by the MFIs in collecting back the borrowed money. It is the high time for the Govt. to spell the regulations to control the excesses of MFIs

I am great fan of GURUCHARAN DAS.He is a author and is on the board of the not-for-profit NGO.SKS Micro-finance.I therefore leafed through his article on "MEN & MORALS" which refers that micro finance has benefited thirty million poor women in Indian villages.It has given dignity to women. 

Poor people many a times find it difficult to get loan from banks. This is due to reasons like  lack of required collateral securities on their part, long time and long procedures involved in sanctioning loans etc. Easiness to get loans is the main factor that attracts people to take loans from micro finance organizations. Banks fail in this area especially when it comes to granting loans to poor people. Micro finance organizations fill this gap where banks are unable to provide loans. But if banks are able to fill this gap themselves, tragedies like those happened in AP can be avoided to a great extent.