Get Microfinance Insights Issue 3. Microfinance - Mixmarket

The interest rates charged by microfinance institutions are far much higher than the ones charged by commercial banks. These interest rates may vary from 12% to 30% which is very high and puts a lot of pressure on the loan applicants especially when most of these applicants come from marginalized groups.

First, there is no standard for interest rates for the poor. There is no enforced system that ensures that microfinance institutions have low interest rates in place that do not create an even greater burden on the poor, creating a cycle of debt and unpaid loans.

3. Education and Health Outcomes: Access to education and healthcare services is a critical aspect of social impact. Monitoring metrics such as school enrollment rates, improvements in literacy, and better health outcomes can help gauge the effectiveness of microfinance in these areas.

While some microfinance interest rates are lower than conventional banks' rates, critics have charged that these operations are making money off the poor.15 Also, many major financial institutions and other large corporations have launched for-profit microfinance departments, raising concerns that, out of a desire to ...

In short, in many of the developing country environments where microfinance has been applied, its potential as a poverty solution is severely diminished. Those who are supposed to benefit end up, at best, “all dressed up with no place to go.”

Through MIX Market, an MFI, funding organization, service provider or network can post business, performance and financial data for public access. This process increases financial transparency in the industry and is an easy way for MFIs in particular to be transparent.

There is a severe lack of awareness of financial services provided by the microfinance industry among the masses. This lack of adequate knowledge is a significant factor that keeps the rural population from accessing MFIs for easy credit to meet their financial needs.

Some criticisms of the microlending industry as it's grown include excessively high interest rates charged on the small loans extended, profit motives at odds with the original intent of helping the poor, and loans so limited they can't really make their impoverished borrowers self-sufficient.