Microfinance as a Financial Service - Essay Example

Microfinance is a financial service that people access in the form of loans. They aim to provide loans to the poor who cannot access bank services. Microfinance has managed to gain popularity around the world. It is not just for developing countries anymore. The idea of self-reliance and independence that micro finances may portray has increased trust in microfinance institutions. The European Union benefits from micro finances. Microfinance has enabled people to start small businesses as it provides equity to entrepreneurs. Even with the popularity, microfinance institutions still lag as the people who may need the services in developed countries do not know them.

            A majority of the inhabitants of nonindustrialized countries cannot access micro finances. This problem arises because the interest rates charged by microfinance institutions are high, hence, making it difficult for those who need the loans to pay back. They, therefore, prefer not to borrow at all. Some people may not borrow the funds due to fear of their businesses not picking up.
This is a serious problem for developing countries, for example, Uganda and thus it should be addressed to enable the micro finances to reach the poor.