Microcredit:
advantages and disadvantages of online loans

In recent years, microloans have become part of the financial system. They provide access to financing to all those to whom conventional banks cannot provide funds. In addition, you can get a cash loan from an MFO much faster than from a bank.

Microloans are small loans that can be obtained from microfinance organizations. Such loans are obtained when there is not enough money to reach your salary, the washing machine has broken down, or the car requires urgent repairs. A microloan will help out in any situation when funds are needed urgently.

Advantages of microloans

The popularity of microfinance organizations is explained by the large number of advantages of their products. Among them are the following:

1. Simplicity of service . Most microfinance organizations pay loans without complex procedures and large volumes of documents. To obtain it, you only need an IIN, passport and mobile phone.
2. Availability for clients . MFOs issue loans from the age of 18 , while in many banks services are available only to those over 21 years old. In addition, to receive funds from an MFO, you do not need an ideal credit history, official employment, or a high level of income. Money can be given to anyone who needs it.
3. Flexible terms . Microfinance organizations offer flexible contract terms. Borrowers themselves choose the period during which they repay the funds, as well as repayment methods and payment amounts.
4. Online registration . To get a microloan from an MFO, you don’t need to go anywhere or communicate with managers. You can apply for a loan without even leaving your home; the entire process takes place online.
5. Delivery speed . Loans from microfinance organizations are issued in 5-30 minutes, depending on the company’s rules. The first time you contact us it may take longer, but regular customers receive their funds within 5 minutes.
6. Schedule . MFO services are available 24 hours a day, 7 days a week; you can borrow money at any time. Some companies review applications at night and issue funds only in the morning, but the work schedule of MFOs is still more convenient than the work schedule of banks.
7. Loyalty program . Most credit companies have an extended loyalty program. It includes promotional codes, promotions and sweepstakes for customers. Also, a number of microfinance organizations issue funds to new clients at 0.1%, which allows for significant savings.

The main advantage of microcredit companies is the simplicity and availability of conditions. This is what made their services in demand among all categories of residents of Kazakhstan. Microloans are taken out not only by individuals, but also by entrepreneurs for the development of small businesses.

Disadvantages of microloans

So that you can get a more transparent picture of the work of MFOs, you should consider their shortcomings.

Among them we highlight the following:

1. High interest rates. Microfinance organizations set higher interest rates compared to banks. In MFOs, interest on the loan amount is calculated daily. The average interest rate is 1.75% per day. This is due to the risk of non-repayment of funds and the costs of the MFO.
2. Limited loan term. Most companies issue microloans for a period of up to 30 days. However, there are organizations that provide funds for 2 or 3 months.
3. Limited credit limit. At the first application, clients usually cannot receive more than 50,000 tenge. The maximum credit limit is 170,000 tenge.
4. High fines and penalties. Some microfinance organizations charge high fines and penalties for late payments. This can lead to more debt and complicate the borrower’s financial situation.

Considering the specific nature of the activities of MFOs (issuing small loans for a short period), these shortcomings can be considered features of the companies’ activities.