Which of the following definitions best describes the concept of microfinance?

Question

Accepted Answer

Step-by-step explanation:

1. Definition: Microfinance refers to the provision of basic financial services (small loans, savings, insurance, payment services) to low-income individuals or groups who lack access to conventional banking.

2. Match to options:
   - (2) Precisely describes services targeted at unemployed or low-income people who otherwise have no access to financial services — this is the standard definition of microfinance.

3. Why the other options are incorrect:
   - (1) Describes a company under the Companies Act engaged in loans and securities — this is a generic financial company definition, not specific to microfinance.
   - (3) Describes a digital-only, mobile-first bank — that is a fintech model, not the definition of microfinance.
   - (4) Limits microfinance to rural areas only; microfinance serves low-income or excluded people in both urban and rural settings, so this is too narrow.

Therefore option (2) is the best definition.

FINAL_ANSWER: b

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