Can Microlending Improve Community Empowerment by Promoting Financial Inclusion?
Highlights:
- Microlending introduction
- Government support initiatives
- Technological advancements
- Recent development - American Express's digital hub
Microlending involves offering small loans to communities or individuals who have limited access to financial services. These loans are provided by various entities such as microfinance institutions, online platforms, traditional banks, and peer-to-peer lenders. The practice of microlending is common in a range of sectors including healthcare, livestock farming, retail, technology startups, agriculture, crafts, catering, tailoring, transportation, recycling, and education.
Its benefits include promoting financial inclusion, encouraging entrepreneurship, reducing poverty, empowering women in developing nations, or supporting local businesses in underserved areas. Moreover, micro lending helps communities recover from disasters, support sustainable development, improve financial knowledge, create job opportunities, and drive innovation. According to a recent report published by Allied Market Research, the global micro lending industry is anticipated to portray a remarkable CAGR of 12.6% from 2020 to 2027.
Implementation of government support initiatives
Governments worldwide are implementing initiatives and regulatory changes to support financial inclusion, particularly through micro lending development. In many developing countries, a large part of the population is unable to access traditional banking services due to limited income or geographical distances. In order to address this problem, governments support micro lending practices through legislation and the establishment of government-backed micro-finance institutions (MFIs).
These initiatives help cover the financial gap and stimulate local economic and social development. By combining financial inclusion initiatives with broader goals including reducing poverty, achieving economic equality, and promoting social unity, governments are creating an environment that supports the organic growth of microlending.
The rapid technological advancements
The micro lending sector is experiencing a remarkable transformation due to the seamless integration of technology. Fintech firms and digital platforms are utilizing advanced technologies such as big data, blockchain, machine learning, and artificial intelligence to quickly and accurately evaluate the creditworthiness of borrowers. This streamlines the loan disbursement process and reduces the costs of servicing loans.
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Furthermore, technology is essential to automate the process of underwriting and disbursement, which improves speed and convenience for borrowers and reduces the operational cost of lenders. As a result, the provision of smaller loans becomes more financially feasible, leading to increased financial inclusion and empowerment.
American Express has launched a digital hub for small businesses to manage cash flow
The launch of American Express's Business Blueprint represents a significant step toward achieving its objective of becoming an exhaustive digital hub for the financial requirements of small businesses. This initiative aims to create a unique platform on which businesses are able to access information on cash flows, and digital financial tools, and efficiently manage their business cards. This strategic move reflects a broader industry trend, as many financial institutions focus on developing solutions that provide clients with a consolidated view of cash for real-time management and forecasting.
Small businesses are able to benefit enormously from the adoption of these technological advancements and use their strong customer relationships to offer a variety of payment options. American Express's integration into the Kabbage platform, acquired in 2020, further enriches its range of services and empowers entrepreneurs with various digital financial solutions to effectively and confidently manage their finances.
To conclude, the global micro lending sector is experiencing robust growth fueled by government support, technological innovation, and corporate initiatives such as American Express's Business Blueprint. This collaboration is expected to promote financial inclusion, support entrepreneurs, and strengthen global financial inclusion, offering lucrative growth opportunities for the micro lending industry in the coming years.
To gain insights into the micro lending sector and identify avenues for potential expansion, feel free to talk to our expert here!
Short description:
Micro lending offers small loans to communities and individuals who lack access to traditional banking services, accelerating financial inclusion and entrepreneurship. Government support and technological advancements, such as American Express's Business Blueprint, contribute to the growth of micro lending, making it easier for small businesses to obtain funding and promote global economic development.
Author’s Bio: - Harshada Dive is a computer engineer who loves to experiment with trending topics and is passionate about presenting these topics creatively to her audience. When Harshada's not writing, she is either gardening or listening to inspirational podcasts.
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