Banking is often taken for granted in Western countries, where banks are never far apart, and many options for banks are given to consumers. However, a significant portion of the world’s population cannot use these services, whether from a lack of infrastructure or impoverished conditions that prevent individuals from being able to open accounts. Microfinance, often in the form of microloans, is the most viable form for the impoverished to receive financial services, and help those who need it most get a leg up for their small business.
Microloans are a standard method of improving the quality of life of small businesses. Their intended purpose is to launch small businesses into a state of productivity and profit and can give a borrower anywhere from $500 to $100,000 dollars. However, they can also be used to provide financial and banking services to clients who lack access to conventional banking. Utilizing these services is often referred to as microfinancing—and it may be the key to helping the unbanked.
Microfinance, also known as microcredit, is a form of banking service. This service is most often applied to the unemployed, low-income individuals, or groups who simply do not have access to conventional banking services. These services often provide lending in small to medium amounts but offer additional services, such as checking and savings accounts. They may also provide micro-insurance policies or educational services around financing and business. These all combine to ultimately provide impoverished and low-income individuals an opportunity that they may otherwise never have had; the opportunity to become self-sufficient.
In business, microloans may be a general sum of money meant to assist small businesses with any expenditure they may need a hand with. Examples of this include covering payroll, supplying inventory, seasonal expenses that may occur in the small business’s area of expertise, funding an expansion of the business, or simply getting it started in the first place. There are often significant costs that businesses may be unable to cover due to fluctuations in profit. As such, microloans can prevent these small businesses from going under due to necessary, but unexpectedly significant costs.
More ways in which microfinance can help small businesses and individuals
How microfinance can help women in developing nations:
Microfinance directly empowers women by providing funds for starting their own businesses or covering other crippling costs. In microfinance services, women in some countries account for a significant portion of borrowers compared to men. These services can also assist in delivering access to education to these women in the form of business and finance education, empowering women to use the money they have earned more efficiently.
Helping those in rural areas:
Small towns often do not have the same financing as a country’s capital city. Micro-financing directly provides financial services to these secondary towns and rural areas that may otherwise not have access to these services. These funds can also help diversify economies that may be dependent on a single form of income, such as farming or mining.
This financial strategy can also assist in more dire situations, such as post-conflict communities. Helping an impoverished community return to its feet after armed conflict allows members of a community, especially women, who are often disproportionately affected, to return to normality and become a profitable community.
How 3air helps the unbanked:
Microfinance is a form of banking intended to help the impoverished, the unemployed, and those just starting out in the business world get a head start. This financial model achieves this by offering financial services where there may be none, such as loans, banking accounts, and educational services. Microloan platforms are increasingly turning toward blockchain to issue loans because of its transparency and accessibility.
These can be used to support small businesses and empower women entrepreneurs who may otherwise not have a chance in the business world. To support these causes, 3air will provide micro-loans to its platform users, allowing anyone with internet access the possibility to qualify for this important financial service, including those in impoverished situations or rural areas.