Micro Finance: The Pillars of a Tool to Socio-Economic Development

Abstract

Micro enterprises make an important contribution to economic output and employment in developing economies. While estimates vary greatly depending on definitions, recent work by the World Bank suggests that almost 30 per cent of employment in low-income countries is generated by the informal economy, while an additional 18 per cent is provided by (formal) small and medium enterprises. Micro enterprise faces more problems in raising finance, as the provider of finance may not find the return on investment interesting as compared to large enterprise, and also investor is more skeptical about repayment. The micro financing has blend of social & economic characteristics and hence the foundation can be strong that can achieve objectives of micro financing efficiently and effectively, if one knows the pillars of micro financing. The paper explores important elements of micro finance.

Keywords: Micro Finance, Elements, pillars, socio-economic development

JEL Classification: I3, P34