When people or business organizations require money, they go to banking institutions to apply for loans. Based on their application, eligibility, and collateral they get the required loan from the Bank.
But this is not the whole story of getting loans. Most of the loan applications get rejection due to rigorous eligibility criteria. Only successful and resourceful people or business entities get such financial facilities from the banks and not the common ones.
Microfinance companies have started the concept of Microloans or Micro Credit. It is similar to bank loans and requires Microfinance Software for the management of loans. Many of us consider Microfinance and Microcredit as the same. There are many visible differences.
WHAT IS MICROFINANCE?:
Microfinance was started by Mr. Muhammad Yunus of Bangladesh in 1976 with the origination of “Grameen Bank.” It has started to provide services to poor people and businesses in Bangladesh. It mostly granted loans to women.
The Grameen Bank of Bangladesh is the perfect example of a Microfinance system.
WHAT IS MICROCREDIT? :
Microcredit is just a part of the Microfinance business process. The loans that MFIs provide to poor people can be labeled as “Micro Credit.”
The Concept
a. Microfinance is the whole service that MFIs provide. There are many similarities between a Bank and Microfinance institution.
b. Microcredit is the small amount of loan that a Microfinance Company provides to poor individuals and/or organizations.
• Software Usage
Microfinance Companies rely heavily on the utilization of Microfinance Software. It is similar to the general core banking system where MFIs can look after the whole Microfinance business-related operations like opening and management of accounts, loan origination, maintenance and repayment, micro-insurance, and many more
