InvestorQ : How do MFIs function in India?
Karim Sahu made post

How do MFIs function in India?

Anusha Savla answered.
3 years ago

Microfinance institutions (MFIs) do not function like banks. The lending system of the MFIs is completely different from that of the traditional banking sector.

In the microfinancing sector, the financial institution which is disbursing the loan appoints an official who gets in touch with the borrower group to discuss the loan application and disbursal procedure. The official, understands the skills and requirements of the applicant first and then on the basis of that he/she finalises the amount to be sanctioned.

Appointed officer plays a crucial role

The appointed officer not only understands the business that the borrower is currently conducting or interested to start in future, but he/she also analyses the risk factor associated with it. Followed by that, the official makes all the necessary rules and regulations for the team and arranges for their training to turn them into skilled professionals.

After that, various government, non-governmental organisations and banks give a loan if the borrowers follow certain rules set by the microfinance institutions.