Microfinance Institutions

Microfinance Institutions offer credit to different community and groups through different credit lending models. The institutions are generally engaged in savings activities and financing activities for their members. In most of the cases, the Microfinance Institutions are autonomous bodies which are operated in a democratic way.
Microfinance Institutions are the organizations which carry out different microfinance activities. But, the features and characteristics of Microfinance Institutions, can differ from country to country. In some countries, these institutions do not have a legal base, whereas, in some countries Microfinance Institutions are legal bodies, enjoying protective measures like tax breaks and insurance advantage.The Microfinance Institutions across the world use different credit lending models. So, we can categorize the Microfinance Institutions according to the credit lending models adopted by them.

Types of Microfinance Institutions:
The main types of Microfinance Institutions are discussed below:

  • Cooperatives:
    Cooperatives are one type of Microfinance Institutions, which are jointly owned by a group of people and are run in a democratic way. These cooperatives are autonomous bodies which are voluntarily created by a group of persons to serve the economic and social need of people. These cooperatives carry out different savings activities and microfinance activities for their members.
  • Community Banks:
    Community Banks are the Microfinance Institutions which are established on a formal or semi-formal basis. These Microfinance Institutions considers the whole community as a single unit and engages in savings activities and financing activities for the members. In many cases, these community banks get extensive help from NGOs in carrying out financial activities.
  • Credit Unions:
    Credit Unions are Microfinance Institutions which are established by members of a particular organization or association. These Microfinance Institutions are run by members and follow the concept of self-help in order to carry out the financial activities. These institutions are owned and governed by the members in a democratic way. The members elect directors and representatives through voting process. These non profit organizations work through members who agree to save together and decide to provide credit to each other at fair interest rates.


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Last Updated on : 30th July 2013

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