Question

Which services are typically provided by Microfinance Institutions (MFIs) ?

1. Microloans
2. Investment banking
3. Microsavings
4. Corporate bonds

• A. iii, iv
• B. i, iii
• C. All
• D. iii only

Answer 1

Answer:

B. i, iii

Microfinance Institutions (MFIs)

• Microfinance Institutions (MFIs) are financial institutions that provide financial services such as small loans, microsavings, and microinsurance to individuals who do not have access to traditional banking services.
• These institutions play a vital role in promoting financial inclusion and empowering underserved communities, especially in rural areas.
• They often operate as non-bank financial institutions, offering essential financial services to individuals and small businesses that may not have access to formal banking systems.
• MFIs are regulated by the Reserve Bank of India (RBI) through its Non-Banking Financial Company-Microfinance Institutions (NBFC-MFIs) Directions. 

MFIs typically provide the following services:

Microloans:

• MFIs offer small loans to individuals or groups, especially those who lack access to traditional banking services.
• These loans are often used for income-generating activities or small businesses.
• It allows individuals to borrow small sums of money without providing any collateral In India, all loans that are below Rs.1 lakh can be considered as microloans

Microsavings:

• MFIs offer savings accounts to their clients, allowing them to save small amounts of money without the need for a minimum balance.
• This helps clients build financial resilience.

Microinsurance:

• Some MFIs provide insurance coverage to borrowers, offering protection against unexpected events such as illness, accidents, or crop failures.
• This helps clients mitigate risks and financial shocks.