What is microfinance?

Microfinance mainly refers to the activities of providing small-scale sustainable financial products and services for small and micro enterprises and low-and middle-income groups. Such projects or institutions that provide special financial products and services to specific target customers pursue their own financial self-reliance and sustainable development goals. Microfinance focuses on strengthening the construction of settlement platform. We will improve the cash management business system and continue to rely on key businesses and services such as traditional settlement, microfinance transaction financing, trade financing and cash management to promote deposit growth. The endogenous growth mechanism of deposits in microfinance companies has gradually taken shape.

Microfinance has the following characteristics:

1, for small and micro enterprises and poor or low-income groups;

2. Due to the particularity of customers, it will provide financial products and services suitable for customers of specific target classes;

3. Small and micro enterprise finance also has the characteristics of high risk and high return, in which high risk means that the lack of collateral makes small and micro enterprise finance rely on the personal credit of business owners most of the time; High profitability means that in addition to the traditional risk premium, demand is far greater than supply, and excess returns can be obtained.

Compared with small loans, the interest rates of joint-stock banks and city commercial banks, such as US dollars and small loans in euros, are generally higher. Take one-year deposits as an example: the interest rate of small banks in US dollars is mostly 0.5%, and some are as high as 2.5%. L percentage points higher than the lowest among the four major banks.

Small and micro enterprise finance has the characteristics of high risk and high return: high risk and insufficient collateral make small and micro enterprise finance rely on the personal credit of business owners most of the time. In addition, the strong uncertainty of small and micro enterprises is also the main risk source of microfinance. High-yield, in addition to the traditional risk premium, because the market is not open, the demand is far greater than the supply, and the policy premium of small loans is the source of excess income.