Microfinancing offers small, low-interest loans to individuals, families, and small businesses in emerging economies. However, many households and enterprises still lack access to formal financial services due to various obstacles. This leads them to rely on personal borrowing networks or unregulated sources with high fees and interest rates.
Microfinancing offers an indispensable lifeline to entrepreneurs around the world. The model of small, low-interest loans brings much-needed financial services and relief to individuals, families, and small businesses searching for a foothold in emerging economies . Unfortunately, households and enterprises in such markets as Peru, Bolivia, India, and Indonesia may still lack broad access to the formal financial services they need to manage their finances and attain prosperity.
Numerous obstacles to financial inclusion stand in the way. Some are literal: potential banking customers in rural, remote, or disadvantaged locations may be miles from the nearest financial institution. Others are social and cultural, including intricate processes that demand extensive documentation, inequitable loan rates, and unregulated markets. As a result, unbanked potential customers may rely on personal borrowing networks—friends, family, personal savings—or they may turn to less scrupulous or fraudulent informal sources, such as loan sharks who charge exorbitant fees and interest rate
Microfinancing Small Loans Financial Inclusion Emerging Economies Obstacles Unbanked Personal Borrowing Networks Loan Sharks
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