Micropayments And Microfinance Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

BENEFITS OF MICROPAYMENTS AND MICROFINANCE

Microfinance institutions have raised the flag of business productivity over the last couple of decades. This has now vast implications for entrepreneurship, investment and also debt financing. Also, electronic payments not only make the lives of people easy but it is also related to the productivity. People can make the productive use of their time through electronic payments. The concept of microfinance has helped the individuals that belong to the low class income segment, to grow and avail all the financial services that could be only be availed by the high income group clients. Some of the specific benefits related to micropayments and microfinance are stated below:

Businesses can grow through lower investments.
Customers feel more secure and it enhances them.
It provides the customers living in different geographical regions with real time information.
Microfinance targets women borrowers because they default less, this gives empowerment to women.
Those families that receive microfinance will not force their children to leave their schools.
Micro financing also impacts on health care and better sanitation by improved access to clean water.
It helps to create new employment opportunities which have a very positive impact on the economic development.
If the people act under group, then the group is able to pay for someone’s unemployment, illness and other such issues.
Microfinancing gives the clients enough capital to initiate their plans and then generate revenues.

CROWD FUNDING

This is a method of raising finance over the internet by asking for small amounts of money from large number of people. This money is then used to fund ventures or any projects. Crowd funding has introduced the new idea of talking to thousands of people to raise the funds. First of all the profile of the project is set up on the websites and the members of the project then use the social media and other networks to raise the money from their families, friends and acquaintances. The concept of crowd funding is supported by three classes. First there are the initiators of the project, second there are the individuals that support the idea proposed by the project initiators and the third is the platform that brings the idea in the light to the interested parties.

Over the passage of time, crowdfunding is impacting significantly on the peer to peer lending industry. Crowdfunding is gaining popularity in the modern era. However, still the advantages of the true peer to peer financing can never be neglected. The banking industry offers a place where the people can meet, there is a peer to peer connection. Peer to peer financiers offer more services than crowdfunding. They check the credit ratings of the customers and screen out the un-creditworthy customers that have defaulted previously. Also, there is an unpredictable significant impact on the quantity of the money that is in the circulation. Banks have the power to create money by taking deposits. However, this power does not exist in the crowdfunding market.Looking. at all of these factors it could be seen that crowdfunding is not a suitable alternative to peer to peer financing. Peer to peer financing offers its consumers full security and conducts all the transactions on a peer to peer basis.

If we compare the peer to peer lending with the crowd funding concept, than it can be seen that crowd funding is no doubt a larger implementation of peer to peer lending. However, with regard to the success, the peer to peer lending is also threatened by crowd funding. The reasons are because crowd funding also offers more control and transparency than the traditional banks. This is because crowd funding takes this all to a new level.

On one hand if we look at the concept of crowd funding and the peer to peer financing of the bank, it is clear that both the things overlap each other. Both are a form of raising finance for projects or ventures. The loan raised will have to be paid back in both the cases. However, there are certain things that differentiate crowd funding from the traditional peer to peer financing of the banks. Crowd funding is more flexible for of bank financing as compared to traditional peer to peer bank lending. However, still crowd funding has not replaced the bank peer to peer financing completely. Banks have been a source to acquire loans for businesses since the beginning and now after the financial collapse in 2008, the banks have started to charge much higher rates of interests on their loans. These risks have increased and financial institutions want to have more control over the money that they lend. Although, the concept of both overlaps, but they are different methods to acquire financing...............................

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