The Role of Microfinance in promoting financial inclusion and economic development in the World

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Microfinance is a form of financial service which provides small loans and other financial services to poor and low-income households.

Micro-financial companies provide small loans to people who do not have any access to banking facilities. The Unbanked.

MFI promotes financial inclusion which enables the poor and low-income households to come out of poverty, increase their income levels and improve overall living standards.

It can facilitate achievement of national policies that target poverty reduction, women empowerment, assistance to vulnerable groups, and improvement in the standards of living.

Microfinance has served as an essential economic conduit for enhancing credit access and promoting financial inclusion. Not only has it enabled last-mile connectivity by affording loans to borrowers living in the remotest corners of the world, but has also helped in empowering underprivileged classes, reducing poverty, and improving living standards.

And through this economic development is assured in communities and small businesses are sprouting everyday through small loan financing.

Financial inclusion in turn is buoyed by exponential smartphone penetration, cheap data, and integration of tech with finance and microfinance has been given a new lease on life. By offering digital payments, mobile banking, cash flow-based loans, prepaid instruments, etc., lenders have been sustaining the momentum of microfinance and financial inclusion.

Several traditional lenders have been collaborating with financial companies that mine customer data based on their digital footprint and transaction history to ascertain their creditworthiness. By further interpreting these results through artificial intelligence (AI)-based models, lenders are now in a better position to sanction loans tailored to the borrowers’ needs.

Subsequently, they have also commenced cross-selling products, such as offering insurance and pension products along with credit. This has gone a long way in further improving the financial literacy of the masses and bring much needed development in communities in Africa and the World where small businesses strives and create jobs for the masses. ?

?FRANZ NTOKO, HEAD OF OPERATIONS at CREDIT AFRICA INVEST