How to open a microfinance center
Microfinance generally represents the provision of financial services to small businesses. The purpose of such services is to help start-up entrepreneurs in the accumulation of capital and profit, as well as the creation of an effective system of lending to small businesses. In fact, it is a flexible form of traditional bank credit.
Commercial banks or microfinance organizations
Credit conditions offered by commercial banks are sometimes unbearable for entrepreneurs. Microfinance institutions offer financial services (loans) with a low degree of risk, complementing the offers of banks and thus strengthening the state financial system.
Microfinance programs deal with:
specialized institutions funded from external sources
agricultural credit cooperatives working with farmers and agricultural producers,
so-called business support funds,
credit unions created for the purpose of providing financial assistance to their members and existing at the expense of their savings or equity participation.
In accordance with the program, small businesses receive loans through municipal and state small business support funds without a banking license.
Opening your own microfinance center is not such a utopia today. Those who wish to receive a microcredit on favorable terms for them – ease of processing, with the possibility of early repayment, etc. quite enough. The niche has just begun to fill with organizations, so now is the time to think about how to open a microfinance center.
The registration process is a completely standard procedure for opening a company that provides loans. The newly created center should then be included in the state register of microfinance institutions. After satisfying this requirement, the center will be able to carry out its activities legally.
Availability of initial capital is a prerequisite
The microfinance center is the one case where the start-up capital is indispensable. Indeed, besides issuing loans, money will be necessary, including for the maintenance of the institution. And these are quite expensive items such as renting office space, salaries of employees, loan officers and security staff. You will also have to spend money on the purchase of special equipment, advertisements and other unforeseen expenses.
To open a microloan center, a sufficiently large initial capital is required.
Undoubtedly, the presence of substantial start-up capital, necessary to start the operation of the center, scares many beginning businessmen. The estimated amount of 1 million rubles is called optimal for opening. And derived with the percentage of defaults issued by the funds. However, in the case of a lack of funds, investing in a project from the outside can be an option. Moreover, now many successful investors are concerned about the search for successful business ideas, the implementation of which they are ready to introduce significant financial investments.
Creating an attractive environment for borrowers
Competition in this niche business is gradually increasing. Therefore, now it makes sense to take care of attracting customers, creating attractive loan conditions for them. It is possible to initially set a not too high interest rate or increase the upper ceiling of the amount issued.
Competent specialists are the key to the company’s success. Therefore, it is therefore necessary to attract competent experts in lending to the staff. Acting consistently and professionally, you can quickly reach the self-sufficiency of the microfinance center. And if you really try – to return the investment in a year after its opening.
Summing up, we can say that the microfinance centers have a future. The dynamically growing market offers favorable conditions both for opening your own microloan business and for the borrowers themselves. Regulated only by the Civil Code, the process of receiving money in this case is significantly simplified compared to a similar procedure in a bank. And having received the status of a borrower, the client automatically becomes a partner of the credit union with all the ensuing consequences – the company’s loyal attitude in terms of interest rates, maturities, etc. Having sufficient working capital in sufficient quantities, you can open a business center by, for example, acquiring a microfinance franchise of existing companies.