Difference Between Micro Finance &

Macro Finance
Introduction:
o It seems like the same and people get confused in these words. Both
are related to finance but the target market for both is different.
o Micro finance is specially framed for the need of an individual, a small
industry or any type of small business unit.
o Macro finance is designed for the large section of the economy like big
business corporations or a whole economy.

Micro finance
o A micro finance is a narrow concept which includes the various services
like micro credit, micro savings, micro insurance and many more
schemes.
o The purpose of micro finance is to help the small section of a society
like low-income level people or a below poverty line who are not able to
serve their needs just because of unavailability fund.
o Those who are not able to take a financial help by the conventional way
of putting a security as a guarantee.
o A micro finance helps people to start their own business by proving
finance with a low rate of interest and help to make them independent.

Macro finance
o Macro finance is a broad concept and works on a large scale and its
advantages are widespread.
o Macro finance is an initiative which deals with the large section of an
economy and covers all the financial need and how to provide it to the
needed one.
o A macro finance includes the drafting policy, subsidies, multi-year
expansion plans.
o The main aim of macro finance is to help an economy to grow and to
generate employment and expand an economy.
 o A government provides macro finance in any form to the business like
tax benefits or a subsidy because it will benefit the economy in future.
Difference between Micro finance and Macro finance
Basis Micro finance
Meaning Micro finance is an individual
based concept to furnish
financial services to low-
income individuals who have
no access to finance in a
conventional way.
Concept A micro finance is a narrow
concept and focuses on the need
of an individual.
By whom A micro finance is provided by
micro finance companies, self-
help groups, and non-
government organizations.
Money involved In micro finance, the money
involved is in a small amount.
Time period A micro finance is an endless
activity which goes on and on.
Risk level In a micro finance, there is a
risk of default that an individual
may not pay.
Effect A micro finance has a direct
effect on an individual.
Macro finance
Macro finance is a whole
economy based concept, which
is not framed for any particular
group, to grow the economy at
a national level.
A macro finance is a broad
concept and focuses the whole
nation.
A macro finance involves a
large entity like governments,
big corporation, banks, and
some big private lenders.
The amount of money involved
is in a large portion.
A macro finance is for a
specific time period like 2 years
or a 3 year. It means it has a
predefined tenure.
There is no risk at all because
the main aim is to give benefit
to the economy.
A macro finance has a direct
effect on the whole economy
which indirectly affects the
whole population.
Reasons why farmers need agricultural credit
There are a number of reasons why agricultural credit assists farmers in bringing their
product to market.

Credit is needed in every type of business and agriculture is no exception. The need for agriculture credit becomes
more important when it moves from traditional agriculture to modern agriculture.

Agricultural labour is often under-employed. Production suffers from weather risks. The capacity of farmers to save
and invest is very low.

The agricultural productivity is low due to low use of inputs. The farmers therefore, need credit to increase
productivity and efficiency in agriculture.

This need is increasing over the years with the rise in use of fertilizers, mechanisation and rise in prices.

Some of the reasons why farmers need agricultural credit:

1. Purchase of new inputs

The farmers need finance for the purchase of new inputs which include seeds, fertilizers, pesticides, irrigation water
etc. If the seed of high yielding varieties and other modern inputs are made available to the farmers they can
increase productivity not only of land but also of labour.

2. Purchase of implements
Credit is required by the farmers for the purchase of tractors, threshers, harvesters, water pumping sets etc. The
use of appropriate machinery in land will increase production by growing more than one crop on the same piece of
land at the same time.

3. Better management of risk

Credit enables the farmers to better manage the risks of uncertainties of price, weather etc. They can borrow
money during raining days and pay back the loans during peak years of crops.

4. Permanent improvement in land

Credit also helps the farmers to make permanent improvements in land like sinking of wells, land reclamation,
horticulture, rotation of crops etc.

5. Better marketing of crops

If timely credit is available to the farmers, they will not sell the produce immediately after the harvest is over. At that
time the prices of agricultural goods are low in the market. Credit enables the farmers to withhold the agricultural
surplus an sell in the market when prices are high.
6. Facing crises
The credit is required by the farmers to face crisis. The crisis can be caused by failure of crop, draught of floods.

What are the benefits of

agricultural finance? February 21st, 2018

What are the benefits of agricultural finance?

As a farmer, it can be difficult  to purchase the equipment and machinery you need. The costs can be
exorbitant and can eat into capital that is much needed for other necessities. You may not be aware, but
there is a solution to this in the form of agricultural finance. Outlined below is the importance of
agricultural finance.
 

It will allow you to purchase new inputs

Farmers need to purchase new inputs, such as seeds, fertilizers, pesticides, irrigation water and more.
Agricultural finance can help to make these purchases easier for farmers. If the seed of a high yielding
crop is readily available for farmers, then the productivity of the farm is improved.

Smaller farms may not have the need for agricultural finance for items such as seeds or pesticides but
larger farms may need help with bulk purchases of these items. Seeds, fertilizers and irrigation water can
prove to be a highly expensive continuing need which agricultural finance can help to meet.

You can permanently improve your land

Having agricultural finance means that you are able to make permanent improvements on your land, such
as sinking wells, rotation of crops and even land reclamation. If you were to attempt such improvements
without finance, you may end up spending more money than you are able.

Finance for agricultural improvements means that you can create the perfect working farm to improve
the productivity of your workers and the output of your land. Being able to rotate crops effectively
will help significantly with better crop production and sustainability of farmland, and sinking wells will add
value to your land should you decide to sell it.
 

You can cover land costs

If you are looking to buy new farmland as a budding farmer or simply increase the amount of land you
already have, then agricultural finance can help cover the land costs you may incur. The land you need
will depend on the type of farming you are planning on doing.

In order to apply for finance for land, you will need to calculate how much land you need and what kind of
land you are looking for. Once you have your loan approved, you will be able to move forward with your
endeavour. Buying land with your own money may not be feasible as a start-up farm, which is why
finance is a good option.

It allows you to refinance an older loan

If you already have an agricultural loan, you may want to look into refinancing. This entails taking out a
new, lower-interest loan and using this to pay off the old, higher-interest one. You will still have a loan but
will be saving money due to the lower interest.
This decision will only make sense if the interest savings outweigh the refinancing costs. Once you have
discussed your options with a financial advisor, you can look into refinancing. It will allow you to use your
money for other essentials that you may not have been able to while repaying the older, expensive loan.

Marketing of products
If you are a working farm that sells its produce or livestock, you will need to successfully market your
products. This can involve significant costs including websites, logos, focused ad campaigns, PR and
marketing costs.

For those who are unfamiliar with marketing, you may need to speak to a consultant which will also incur
consulting costs. You can use your agricultural finance as part of your marketing funds to boost your
visibility for retail customers and for private customers too. Be sure to examine every aspect of any
marketing campaign before making any final decisions.

You are better equipped for a crisis

Farming can be a difficult and fickle business. You are never able to predict what will happen to your
crops or livestock, and are at the mercy of customers and competitors. Some farming is seasonal, which
means you may only earn money during certain times of the year.

An agricultural loan can be used to protect yourself during the various ups and downs of your business.
You can also use it for operational costs as well as costs that occur from damages. It is better to be
prepared for every eventuality, which is why having agricultural finance is important to all working farms.

Final verdict
There are many benefits to taking out finance for agricultural pursuits. Your land improvement costs will
go down, as well as being able to refinance your current loan. Farmland purchases are notoriously
expensive, which is why it is best to take out finance to cover the costs. If you are concerned about not
being able to make it until the end of the year due to seasonal crops, taking out finance may be an
affordable solution.