Need For A Financial Model

A financial model is basically a decision-making tool that helps in taking and making all and any type of decision. It might help a company in decisions regarding starting a new venture, a new project entry, investments in some big companies or even merger and acquisitions.

For any company to have a clear idea or overview about any of the above, it is important that they get a clear view about how the finances would be and how would they be able to manage their existing funds into both investments and their routine running of the company.

What would a financial model do?

Now that we know the reason behind why people or business insist on having a financial model, it is now important and essential to know what would this financial model do when it is implemented.

Yes, this helps a company in creating a mock scenario of an investment, the impacts and effects it has on its customers, the outcomes from its implementation and the success ratio it would have when implemented in real. Now this gives a complete understanding and overview of how it would be to have it in the market real-time.

Technology plays a very important and essential role here wherein companies use many different software and applications in creating and designing these models. But predominantly it is the simplistic excel sheets that help us come up with one of this kind.

A proper financial model recipe

A well built and a properly planned financial model would be like this consisting of all the essential details in detail.

  • A properly assumed model with the essential and realistic assumptions.
  • A proper flowing model with no mismatching steps or confusing assumptions.
  • No huge numbers. This would make the assumptions too unrealistic and something that might not be related to or applied in a real-life situation.
  • It should be clearly designed in a way understandable and agreeable to all those this is presented with so that the model is assumed complete because when this reaches the end-customer, who is the target ultimately, it needs to be transparent.
  • There should be clear instructions so that in case of any confusions, people are able to follow them without any assistance.
  • Everything should be in a printable format.
  • All the information, assumptions and facts should mandatorily come with a back up so that they are brushed back for any clarifications.

Microfinance benefits

The latest growth is in the financial service that aims at providing in a better life to the underprivileged people; is the Microfinance. There are a lot of people who live in a very small earning, just as low as $2, and sometimes even find this earning as impossible.

So, what are the benefits of microfinance, why is it getting more popular?

Gives the underprivileged an access to credit:

Since money is the biggest problem here to all, especially in the underprivileged group; microfinance helps those people to gain access to some smaller credit notes and improve their business or develop one or help themselves in times of drought.

Read the Ethereum Code review

The life of debt that most people live is extremely bad, that lets them die in poverty. No larger banks offer a homeless, a jobless person a loan to come up in life, to provide basic facilities in life. That’s where the microfinance comes in the picture, it gives them a lease of life by offering loan without any collateral. This, in turn, helps in reducing the poverty levels across the world.

Better rates than ordinary banks:

The rate of interest offered by traditional banks are way too high and is standardized no matter what! But, in microfinance, the concept is mainly focusing on helping people live a better life, to start living on their own. Hence the loan is sort of biased, but on good terms, the person who is found more capable of earning and repayment is given lower interest rates and also offered a newer loan once the first loan is repaid. This is helping more women to come out of their homes in developing their business, be it in baking or basket making.

Helps in educating the underprivileged:

Education is the biggest weapon that one can use in eradicating the illness of the world, like the poverty, malnourishment, lack of job, early marriage and pregnancy, abuse and harassment and many others. When a flock is educated they tend to pass on the knowledge, the learnings to their group and encourage them to live a better life.

So, this small finance help families in educating their children, give them a future, a ray of hope to build a better nation and also to earn a good stable income once their children settle down with jobs. This is more fruitful in girls especially, as they educate others and also a whole family in turn.