This study explores the working structure of informal microfinance, including daily collection finance and its economic implication on women traders in Manipur. The study aims to understand the operational mechanism of informal lending systems and the reason for their popularity among the women traders in Manipur despite their high rate of interest. Primary data were collected from 120 women traders of different market location, and members of ROSCAs (Rotating Savings and Credit Associations) based microfinance institute members, using different structured questionnaires. The findings show that most of the client of informal source of credit are satisfied with the services despite its higher cost. Loans from informal source may keep their business afloat but it is unlikely that there will be creation of substantial assets because of higher rate of interest. The study also finds that lack of access to formal sources makes this the go-to source of fund for these women traders. The study concludes that the informal source, especially the daily collection finance is the main source of funds for women engaged in small scale trading activities, but greater financial inclusion and access to suitable formal credit source with interest rate similar to that of informal source are necessary to improve the financial well-being of women traders.