Microcredit Vs. Microfinance (Difference) – Microfinance | Management Notes

Microcredit Vs. Microfinance
Difference between Microcredit and Microfinance
Management Notes

Microfinance is the process of extending financial services to those people who have low income and it becomes hard for them to get finance from the banks and other private money lenders. Microfinance is a financial practice that helps improve living conditions for the poor and unemployed in the short term and long term. A microcredit is an aspect of the microfinance which includes all types of loans that financial institutions, such as banks and insurance companies, provide to poor or unemployed individuals.

Microfinance and microcredit activities help low-income or unemployed individuals fulfill personal needs in the short term and long term. These activities also help developing and underdeveloped countries balance budgets and fund social programs.

Simply,Microfinance means the broad spectrum of financial services such as loans, insurance, savings etc. provided to the people of low-income groups. Conversely, Microcredit alludes to a small loan provided, at a low-interest rate, to the persons of below poverty line to make them self-employed, i.e. to help the small entrepreneurs start their own business.
Some of the major difference between Microcredit and Microfinance are as follows:




Definition Micro-credit is the small loan facility provided to the people with less earning, to motivate them to become self-employed. Micro-finance refers to the number of financial services provided to the small entrepreneurs and enterprises who cannot take shelter of banks for banking and other services.
Services Micro-credit includes only credit form of activities. Micro-finance includes credit activities and non-credit activities like savings, pension, insurance, etc.
Component Micro-credit is an aspect or we can say a component of the microfinance.  Microfinance is a whole concept. 
Need Micro-credits are small size loans with shorter repayment periods. They are granted for small-scale activities which direct to serve local needs. Microfinance services help to low-income individuals and start-up in developing countries to start running a small business, increase assets, diminish risk, raise productivity, increase return on investments, increase incomes, improve access to education and eventually increase the welfare.

Author: Smirti

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