Microcredit - Loose Change for Real Change There are significant benefits among the “gung-ho entrepreneurs” (individuals who established businesses before microfinance wave). The effects are unsatisfying to those who had no previous businesses (reluctant entrepreneurs).
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rom the previous decades up to the early 2000s, international development was to be propelled by microloans. The objective was to lend small loans to individuals in developing countries to assist them in developing and also expanding their small businesses hence kicking poverty out of their families. Profits from the returned loans would then be used to lend to more individuals aiming at a very large number of families to do away with poverty. Many microfinance lending organizations began at those times. Very many organizations started to offer loans as potential donors and investors supplied funds to microcredit. By the end of 2013, there was a rise in the number of borrowers to more than 200 million. Accion US Network is an example of one such institution in the US. It is the largest nonprofit microfinance network in the US and works with people to help them grow their business.
What Is Microcredit? Microcredit is an extension of small loans to poor individuals who lack steady, verifiable, or collateral employment or credit history. In the US, it is generally for loans less than $50,000 to entrepreneurs who cannot borrow from a bank. It was designed to alleviate poverty by promoting entrepreneurship. Many of the beneficiaries of microcredits are illiterate individuals who lack the capacity and paper competence needed in the application of conventional loans. Microfinance is deemed to be part of microfinance, although many times they are used interchangeably. It provides a variety of financial services, such as savings accounts for poor individuals. 37
Techfastly | August - September 2020
Successful Examples: In 2009, an estimated 75 million individuals benefited from microloans that totaled to around US$38 billion. The repayment success rate ranges between 95%-98%, according to the Grameen Bank in Bangladesh in the early 1980s. A study found that more than half of US loan recipients escaped poverty in 5 years. Here are some of the successful most influential and largest microfinance institutions today:
Kiva Kiva is a non-profit microfinance institution operating in the U.S and other 85+ global countries. It is headquartered in San Francisco and was founded in 2005. It uses crowd-funding mechanisms and peer-topeer methods of lending. It allows persons to directly lend to borrowers in other nations who don’t have access to the traditional financing sources. Financing for health services, education, and small businesses are interest-free. Kiva has extended over $1.5 billion microloans to more
