Microfinance is nothing but a micro-credit and micro-lending. It is a financial aid to small businesses and emerging entrepreneurs, who are not eligible for traditional bank lending. The primary motive of microfinance is to create social development using most favorable lending conditions intended to assist needy borrowers to become independent.
The profit making for micro-lending is always kept as a secondary factor. That’s the reason why microfinance lending has gained so much popularity and had appealed global audience. Here are some steps one needs to follow for starting up a microfinance company-
Develop a mission statement and target some potential entrepreneurs as well as small business enterprises. Micro-credit based on activities can target small businesses like fishery, textile or agricultural based initiatives. Some women-specific businesses such as home-based child care enterprises can be treated as better options.
The second vital step involves securing enough capital, which is entirely based on the scope and amount of lending. If one wants to structure an organization into non-profit entity, then he can seek grants from federal agencies such as Department of Agriculture. Some other grants like USDA’s Rural Micro-entrepreneur Assistance Program are also available.
Microfinance credit system is not based on conventional banking requirements. An applicant must possess the ability to repay the loan. The economic and social background of customers needs a long term commitment and highly progressive attitude. This step involves focusing on the factors which can assess business plans and working ability of applicant to repay the loan within time.
The final and most important step involved in microfinance is recruiting quality personnel. All the staff must have relevant qualification and experience in small business assessment as well as financial lending. Agents who are involved in lending businesses must possess the effective customer handling skills and must efficiently execute the factors included in lending applications. When it comes to employee training, an instructor must possess enough teaching experience and entrepreneurial attitude that offer value addition to workshop.
The effective implementation of above steps will help you in starting your microfinance company without any hassle.