Difference between Traditional Financing and Micro-Financing – Microfinance | Management Notes

Difference between Traditional Financing and Micro-Financing
Traditional Financing Vs Micro-Financing
Microfinance | Micro credit 
Management Notes

Traditional financing generally means a loan or line of credit secured through a financial institution under conventional terms, usually based on the “four Cs”: character, collateral, capital, and capacity. Microfinance is a type of banking service that is provided to unemployed or low-income individuals or groups who otherwise would have no other access to financial services.

Some of the major difference between Traditional Financing and Microfinancing are as follows:

Traditional Financing

Micro Financing

Traditional Financing is Collateralized  and people need to keep properties like land,building,gold,etc for taking debt or loan. Micro Financing is Non Collateralized as there is no need of collateral for taking small debts or loans for the poor.
Traditional Financing is single or unit based financing. Micro Financing is group based financing.
Traditional Financing can place from small to huge amount. Micro Financing is always of small amount.
Traditional Financing contains generally cheap interest rate. Micro Financing contains relatively high interest rate.
Traditional Financing is done for the personal or business motive. Micro Financing is generally done for the upliftment of livelihood of poor ones.

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