Understanding microcredit loans
Around the world, more than 1.2 billion people live on less than a dollar a day and 70 per cent of these people are women. In many parts of the world, poor people in rural areas face considerable difficulties finding employment, leaving them with just two options: work for themselves or starve.
But in order to work for themselves, they often need access to resources to start up a small business. However, because these people lack steady employment and collateral, they can't meet the qualifications to gain access to credit and are unable to get the financial loans they need to begin working for themselves. And so, the cycle of poverty continues.
What is a micro-credit loan?
Micro-loans provide unemployed people, and people living in poverty, with small loans to start up income-generating projects and small businesses, enabling them to escape poverty or at least slightly improve their lives.Micro-credit is a simple idea: a small loan, with an interest rate that is generally on par with commercial rates, is used to help people -- mainly in developing countries -- who can't secure credit, to set up a small business and generate profit. When the loan is repaid, the borrower is eligible for a larger loan to expand their enterprise. The proceeds from the interest increase the pool of funds available to provide loans to more people. The process of selecting loan beneficiaries varies from organization to organization.
The first micro-credit loans were issued in Bangladesh in 1983 by economist, and 2006 Nobel Peace Prize winner, Muhammad Yunus. Today, there are thousands of micro-credit institutions around the world and more than 113 million impoverished people have received micro-credit loans.
The average individual loan is approximately $150US to fund small business projects such as raising chickens to sell eggs, opening small retail businesses, vegetable gardening, livestock-rearing or buying sewing machines to make and repair clothing. But many say that we can't eradicate poverty without empowering women. Traditionally, there have been few opportunities for women to earn money outside the home in developing nations.
But in order to work for themselves, they often need access to resources to start up a small business. However, because these people lack steady employment and collateral, they can't meet the qualifications to gain access to credit and are unable to get the financial loans they need to begin working for themselves. And so, the cycle of poverty continues.
What is a micro-credit loan?
Micro-loans provide unemployed people, and people living in poverty, with small loans to start up income-generating projects and small businesses, enabling them to escape poverty or at least slightly improve their lives.Micro-credit is a simple idea: a small loan, with an interest rate that is generally on par with commercial rates, is used to help people -- mainly in developing countries -- who can't secure credit, to set up a small business and generate profit. When the loan is repaid, the borrower is eligible for a larger loan to expand their enterprise. The proceeds from the interest increase the pool of funds available to provide loans to more people. The process of selecting loan beneficiaries varies from organization to organization.
The first micro-credit loans were issued in Bangladesh in 1983 by economist, and 2006 Nobel Peace Prize winner, Muhammad Yunus. Today, there are thousands of micro-credit institutions around the world and more than 113 million impoverished people have received micro-credit loans.
The average individual loan is approximately $150US to fund small business projects such as raising chickens to sell eggs, opening small retail businesses, vegetable gardening, livestock-rearing or buying sewing machines to make and repair clothing. But many say that we can't eradicate poverty without empowering women. Traditionally, there have been few opportunities for women to earn money outside the home in developing nations.
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