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What are Microloans?
Microloans are short-term loans with smaller loan amounts that can be availed by self-employed, startups, micro enterprises, small businesses and individuals with low capital requirements. Microloans is a type of small finance offered to micro entrepreneurs or low-income group families who have little or no access to financial or lending institutions.
With the help of Government of India, RBI has initiated in reaching out to the unbanked and under banked people to provide them funding, in partnerships with private limited companies and Micro Finance Companies (MFIs). NGOs are considered to be the most common micro lenders after MFIs and private limited companies.
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Micro loans are availed by the following entities:
Microloans are majorly availed by self-employed, sole proprietorship, small retailers, traders and manufacturers, startups, consultants, women entrepreneurs, unemployed people, workers with minimum wages, minorities, etc.
Purpose of Microloans
Microloans can be used for various business related activities, such as meeting working capital requirements, maintaining cash flow, starting a new business, managing day-to-day expenses, paying salaries to staff, debt consolidation, etc. People facing trouble in availing business loans generally consider microloans or micro finance.
Objectives of Microfinance
- To promote the socio-economic development among unbanked or under-banked families
- To reinforce the Self-Help Groups (SHGs) and use them for economic development of the country
- To support and promote startups and women entrepreneurship across the nation
Popular Microloans providers in India
Bandhan Bank
| Microloans – 2022 | |
| Interest rate | 17.95% onwards |
| Loan amount | Min. Rs. 1,000 & Max. Rs. 25,000 |
| Processing Fee | Nil |
| Repayment Tenure | Up to 12 months |
| Doorstep facility | Available, under Dedicated Doorstep Service Center (DSC) |
Note: The mentioned interest rates, fees and charges are subject to change and depend on the sole discretion of the MFI and RBI. GST and service tax shall be levied extra on the mentioned charges.
BSS Microfinance
| Micro loans – 2022 | |
| Interest rate | 25% onwards |
| Loan amount | Min. 12,000 & Max. Rs. 50,000 |
| Processing Fee | 1% of the loan amount on micro loans of amount above Rs. 25,000 |
| Collateral | Not required |
Note: The mentioned interest rates, fees and charges are subject to change and depend on the sole discretion of the MFI and RBI. GST and service tax shall be levied extra on the mentioned charges.
Annapurna Microfinance
| Group Loans – 2022 | |
| Interest rate | 21.90% onwards |
| Loan amount | Min. Rs. 10,000 & Max. Rs. 80,000 |
| Processing Fee | 1% of the loan amount + GST |
| Repayment frequency | Weekly, Fortnightly or Monthly, as per the choice of the borrower |
Note: The mentioned interest rates, fees and charges are subject to change and depend on the sole discretion of the MFI and RBI. GST and service tax shall be levied extra on the mentioned charges.
SKS Microfinance
| Income Generation Loans (IGL) – Aarambh – 2022 | |
| Interest rate | 23.55% onwards |
| Loan amount | Min. Rs. 7591 & Max. 11,610 for the 1st loan, next loan increase set is of Rs. 14,959 determined by credit history |
| Processing Fee | 1% of the loan amount |
Note: The mentioned interest rates, fees and charges are subject to change and depend on the sole discretion of the MFI and RBI. GST and service tax shall be levied extra on the mentioned charges.
Equitas Small Finance Bank
| Microfinance – 2022 | |
| Interest rate | 23% onwards |
| Loan amount | Min. Rs. 2,000 & Max. Rs. 35,000 |
| Processing Fee | Up to 1% of the loan amount |
| Offered to | Economically Weaker Section (EWS) & Low Income Group (LIG) categories |
Note: The mentioned interest rates, fees and charges are subject to change and depend on the sole discretion of the MFI and RBI. GST and service tax shall be levied extra on the mentioned charges.
Ujjivan Small Finance Bank
| Micro loans – 2022 | |
| Interest Rate | 22% onwards |
| Loan amount | Min. Rs. 2000 & Max. Rs. 60,000 |
| Processing Fee | 1.2% of the loan amount (For loan amount above Rs. 25,000) |
| Repayment Tenure | 6 months, 1 year, 1.5 years and 2 years |
Note: The mentioned interest rates, fees and charges are subject to change and depend on the sole discretion of the MFI and RBI. GST and service tax shall be levied extra on the mentioned charges.
Microloans or microfinance are also offered by National Bank for Agricultural and Rural Development (NABARD), initiated and sponsored by the Government of India.
How to apply for Micro Business Loan?
To avail microloans, applicants need to simply visit the official website of the desired MFI and fill in the loan application form and submit all the required documents. After the form submission, MFI’s representative will contact the applicant and shall proceed the loan formalities. Once the MFI is convinced with all the submitted documents, shall disburse the loan in the applicant’s bank account.
People in need of money should first apply for business loans from private and public banks or NBFCs, as the interest rates offered by banks and NBFCs are comparatively lower than MFIs. However, if the applicant has already tried with them then surely can opt for MFIs. Generally, applicants with very low credit scores or no financial history apply for micro loans.