In a nutshell, microfinance is the practice of extending a small loan or other forms of savings, credit, checking, or insurance products to people who typically do not have access to this type of capital.
For many impoverished individuals, microfinancing is an avenue for becoming financially independent and economically sound. As a result, they can work their way up to better living conditions.
Apart from what is stated above, below are some benefits of microfinance programs in the Philippines:
a.) It allows individuals to provide for their families better
As said above, microfinancing is a way for individuals to provide a better life for their families. In a sense, it allows for a level of resiliency in a developing world. More often than not, it only takes one adverse event to send people right into poverty—even when they have managed to get out of it. With microfinance, these people can avoid that from happening.
b.) It gives people access to credit
Banks typically do not extend loans to individuals they consider ineligible as they are without credit or collateral. Banks consider these instances as a risk. Resultantly, those living in poverty are left without much choice. With microfinance opportunities, however, people have access to even small amounts of money—all of which can stop or at least slow poverty.
c.) Gives importance to individuals overlooked by society
More often than not, the primary recipient of microloans tends to be women. Similarly, vagrants, unemployed individuals, and those with disabilities are often eligible for microfinance products. This will help them jump-start their lives and steer them in a better direction.
d.) It is a sustainable process
As microloans are generally small in amount, there is not much risk involved. However, this small level of working capital offered can already go a long way for struggling individuals. Moreover, these small amounts are sustainable as they are essentially forgettable amounts.
e.) It can create real jobs
Microfinancing is an excellent way to allow entrepreneurs in developing countries to create employment opportunities for others. When more jobs are created, the economy is revitalized. Needless to say, the economy also benefits as there are now revenues moving through local businesses.