An Insight : Microfinance

Some people still see micro finance institutes with mere skepticism. They claim that those institutes make more profit than general banks; the fact is true to some extent as in some micro finance institutes the interest rates are much higher than those of normal banks. If we see the micro finance institutes from a different perspective, probably we can do some sort of justification to its working model.
Normally the penetration of general banking system is limited to only those groups or individuals who can afford to take loans, or even they do not require the same but they avail it as part of their financial planning. The left outs are the people who really deserve the money. Considering the fact that banks are too much concerned about the return of the investment they have done and also they have low penetration and high operational cost, it is clear why micro finance model came in the lime light. It has been a long practice of denial of shelling out loans to those who need it.
There is another counter view: government and organizations also provide financial help to the groups who require assistance. But the money is normally assumed to be a gift rather than an amount which should be made to work harder. Distributing assets via micro finance model just does the opposite practice; it imparts a sense of responsibility to the class availing the loan. The socio-economical progress can only happen when people know how to grow and make asset out of the amount they have.
Last thing, there is obviously a possibility that the micro finance institutes can act as the money lenders or brokers which could turn in to a monstrous practice. Government or central banks should keep a close vigil on the practice of that kind.

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