Microfinance Essay Example | Topics and Well Written Essays - 250 words - 2

Microfinance - Essay Example The government gains significantly as its efforts to improve the living standards of its citizens are boosted through the efforts of microfinance. Lastly, for microfinance that goes public, stockholders are another major stakeholder and their concern is gaining dividends from their shares. There is no one stakeholder that may be considered more important than the others. Microfinance charges very high-interest rates but paid over a very short period of time. The rates are multiple times higher than even those charged by contemporary commercial banks. Further, the rate of repayment is extremely high despite not being secured tangible. This ensures that through the issuance of loans, microfinance is able to make huge profits which sustain them. To deal with life cycle issues, microfinance offer loans with different interest rates. For those who are extremely poor and unable to pay interests, they are given loans with no interest charged. This helps them to build business stamina, especially during hard economic times. One governance mechanism that microfinance use is social security in loans issuance. Since members are poor and do not have property to offer as security against loans to be acquired, collateral for borrowed money is assured intangible communally. As such loans are acquired only through groups. Each member of a group is liable for a loan borrowed and this alone provides an impetus for a member to persuade each other to pay their share of the loan without defaulting.