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. The living standard of poor and the people having no jobs can be improved with the financial practice of microfinance.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.

Simply,Microfinance means the broad spectrum of financial services such as loans, insurance, savings etc. provided to the people of low-income groups. Conversely, Microcreditis a small amount of loan that is provided with  a low-interest rate to the people who are below the line of poverty for making them selfemployed.
Some of the major difference between Microcredit and Microfinance are as follows:




DefinitionMicro-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.
ServicesMicro-credit includes only credit form of activities.Micro-finance includes credit activities and non-credit activities like savings, pension, insurance, etc.
ComponentMicro-credit is an aspect or we can say a component of the microfinance. Microfinance is a whole concept. 
NeedMicro-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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