What are Microloans?

What are Microloans?

Microloans are also known as short-term loans that provide smaller loan amounts to the self-employed, startups, micro-enterprises, small businesses, and individuals with low capital requirements. This small finance is offered to micro-entrepreneurs or low-income group families. This is one of the best finance lending opportunities for the low-income group families who do not have access to financial or lending institutions. Government of India in partnership with the private limited companies and Mico Finance Companies microlending has come into existence for the sake of lower bank or unbanked people.

Who can avail Micro Loans?

  • Self-employed
  • Sole Proprietorship
  • Small Retailers
  • Traders
  • Manufacturers
  • Startups
  • Consultants
  • Women Entrepreneurs
  • Unemployed People
  • Minimum wage workers
  • Minorities, etc.

What is the Purpose of Microloans?

Microloans are especially for the various business-related activities, like -

  • Meeting working capital requirements
  • To maintain cash flow
  • To start a new business
  • To pay salaries to the staff

What are the Objectives of Microfinance?

  • To support women entrepreneurship across the nation
  • To support the socio-economic development for unbanked families
  • To support the Self Help Groups

What are the Best Microloans Providers in India?

ProviderBandhan Bank
Interest rate17.95% onwards
Loan amountMin. Rs. 1,000 & Max. Rs. 25,000
Processing FeeNil
Repayment TenureUp to 12 months
Doorstep facilityAvailable, under Dedicated Doorstep Service Center (DSC)
ProviderBSS Microfinance
Interest rate25% onwards
Loan amountMin. 12,000 & Max. Rs. 50,000
Processing Fee1% of the loan amount on micro loans of amount above Rs. 25,000
CollateralNot required
ProviderAnnapurna Microfinance
Interest rate21.90% onwards
Loan amountMin. Rs. 10,000 & Max. Rs. 80,000
Processing Fee1% of the loan amount + GST
Repayment frequencyWeekly, Fortnightly or Monthly, as per the choice of the borrower
ProviderSKS Microfinance
Interest rate23.55% onwards
Loan amountMin. Rs. 7591 & Max. 11,610 for the 1st loan
Processing Fee1% of the loan amount
ProviderEquitas Small Finance Bank
Interest rate23% onwards
Loan amountMin. Rs. 2,000 & Max. Rs. 35,000
Processing FeeUp to 1% of the loan amount
Offered toEconomically Weaker Section (EWS) & Low Income Group
ProviderUjjivan Small Finance Bank
Interest Rate22% onwards
Loan amountMin. Rs. 2000 & Max. Rs. 60,000
Processing Fee1.2% of the loan amount (For loan amount above Rs. 25,000)
Repayment Tenure6 months, 1 year, 1.5 years and 2 years

Note: Interest rates, fees and charges are subject to change and depend on the sole of the MFI and RBI. GST and service tax shall be levied extra on the mentioned charges.

How to apply for Micro Business Loan?

  • Visit the desired MFI official website
  • Fill the loan application form
  • Provide all the required details and documents
  • Submit the form
  • After submission MFI's representative will contact the applicant
  • MFI's representative once convinced, will proceed to disburse the loan amount to the applicants' bank account

List of Microfinance Companies in India:

  • Annapurna Microfinance Pvt Ltd
  • Arohan Financial Services Pvt Ltd
  • Asirvad Microfinance Pvt Ltd
  • Bandhan Financial Services Pvt Ltd
  • BSS Microfinance Pvt Ltd
  • Cashpor Micro Credit
  • Disha Microfin Pvt Ltd
  • Equitas Microfinance Pvt Ltd
  • ESAF Microfinance and Investments Pvt Ltd
  • Fusion Microfinance Pvt Ltd, etc.

What are the Documents Required for a Microfinance Loan:

  • Loan Application Form
  • Government ID Proof (PAN Card/Passport/Ration Card/Aadhaar)
  • Office address proof
  • Passport size photos of the applicant
  • Track Record of repayments
  • Other required documents'
  • Note: Documents required varies from lenders to lenders

Bottom Line:

A microfinance loan is one of the best opportunities for people who have low or no credit score. People with low credit scores cannot get approval for the loan, but the MFI's gives the opportunity to avail of loan even with a low credit score as the Micro Loans.