Small Loans Can Have a Huge Impact

by Teidi Mitteler

Published on this site: May 19th, 2005 - See more articles from this month...

There's a new trend in the massive world of international finance called "microcredit" or "microfinance." It's the process of giving relatively small loans that help impoverished people start or grow their own small businesses.

Instead of giving a huge check to the government of a country, micro loans go directly to an individual, empowering them with the chance to use their moxie and business sense to build a better life. The loan is usually accompanied by guidance from a mentor and community development assistance.

An example of a microcredit loan might be an Ecuadorian widow being given $250 to buy tools to make her own leather goods. She would get mentoring from the local community development officers, and establish her business. When her profits increased she would pay off the loan.

Women, who have the hardest time establishing a livelihood for themselves, are frequently the recipients of these loans. Once they get the loan they also get to be connected with a wide variety of help from credit counselors and marketing experts. Often, borrowers will themselves, after getting established, help fellow loan recipients, and the cycle goes on.

Microcredit started in rural Bangladesh, a pioneering approach developed by The Grameen Bank. In the language of the area "Grameen" means "rural" or "village." In this rural area the loans were used to buy goats, rabbits, to start small shops, etc. The approach was so successful that it quickly spread around the globe. The United Nations now has declared fostering microcredit to be a formal goal of their organization.

Microcredit is a more personal approach to providing assistance to impoverished people. Instead of just receiving a handout, microcredit recipients join a community of mentors and fellow businesspeople. The donors are often also very involved one organization urges donors to send an inspiring letter and a photo of themselves along with their donation. Sometimes the donations aren't used to help start a business but, for example, help a war survivor get back on his/her feet.

Microcredit programs are found all over the world, but most often in poor countries, or those that have been hit by natural disasters, manmade disasters like war and genocide. Tsunami victims will likely eventually be part of a micro lending program. Programs are found in Rwanda, Afghanistan, Bosnia and Iraq. These programs are working to raise the quality of life for the people who need it most.

Teidi Mitteler is the founder of <a href=http://www.fchloan.com>FCH Loan</a> - the number one resource for information on loans. To see more articles on loans, visit this site: http://www.fchloan.com