What Is Microlending?
Posted On 21/07/2019
A microloan is a small amount of money that can be obtained for a short period. At each microfinance company, conditions can vary greatly. But in most cases, microloans are issued in minutes, and this requires a minimum set of documents.
Who Came up With a Microloan Idea?
The idea belongs to Professor Muhammad Yunus. He is from an emerging country of Bangladesh. However, the professor received an economic education in the United States. He was always worried about the issue of hunger and poverty in his state. Therefore, after returning home in 1974, he has been taking an active part in the development of the economic system of Bangladesh.
Yunus noted that if you lend even a small amount, it can play an essential role in life and significantly improve the financial condition of poor people. For the experiment, Yunus gave 27 dollars as microcredit to ten women who made bamboo furniture. This was quite enough for them to be able to purchase material. Furniture was manufactured and sold quickly, and there were no problems with the return of funds. Both sides received a profit. Yunus decided to continue his experiment. He issued loans with the condition that the money will be spent on expansion and opening a business.
Local moneylenders considered Yunus insane and did not believe in the success of his concept. But to everyone’s surprise, less than 3 of the money was not returned. In comparison with ordinary loans, this figure was negligible. Soon the professor created his own Grameen Bank, which has become known throughout the world. Everything there has been based solely on trust, without any written agreements. There has been no higher return rate in any bank in the world.
Knowing what difficulties may arise when applying for a loan in a bank, many people have long been afraid to borrow at all. Nevertheless, microcredit is quite popular today. Although the interest is higher than in banks, the advantages regularly attract customers:
- The probability of being refused by a microfinance company is much less than in banks. Even with a bad credit history, the chance to get microcredit is much higher.
- The application procedure and approval of the application are extremely fast. In most cases, it does not take more than 30 minutes. Microcredit can also be issued online via the Internet without communication with staff.
- Minimum documents and requirements. In most cases, you need a passport, TIN code, and the availability of an income document.
- You can pay the loan via the Internet.
- No need to specify the purpose of the loan.
For What Purposes are Microloans Needed?
Considering the short periods for which microcredits are issued, they are usually taken for various needs before the salary. Besides, for many, this is the only way to pay the bill for an apartment, training and other services on time. Most often, microloans save from such unforeseen expenses as treatment.
Despite the wish to live without borrowing, some money can be urgently needed. Make use of the benefits provided by microloans and pay them back as soon as possible.