https://doi.org/10.36719/2706-6185/45/247-251
Ramin Fatullayev
Azerbaijan State University of Economics
https://orcid.org/0009-0008-9883-5976
rafatullayev@outlook.com
The Essence and Characteristics of Microfinancing for Small and
Medium-Sized Businesses
Abstract
Microfinancing of small and medium-sized businesses (SMEs) is a system of financial services aimed at supporting entrepreneurs who face difficulties in obtaining traditional bank loans. The primary goal of microfinancing is to provide access to capital for small enterprises and startups, facilitating their development, job creation, and economic growth. A key feature of microfinancing is the issuance of small loans, often without collateral, with a simplified application process. It also includes advisory and educational programs that help entrepreneurs manage their finances and businesses effectively. Lenders in this sector, including microfinance organizations and funds, consider not only the borrower's financial indicators but also their reputation, business model, and growth prospects. However, microfinancing is accompanied by high-interest rates due to increased risks. Despite this, it plays a crucial role in the development of small businesses, particularly in developing countries, by fostering innovation, job creation, and improved living standards. As a result, microfinancing becomes an important tool for financial inclusion and entrepreneurial support.
Keywords: small and medium-sized business, microfinancing, finance, business, management