Micro Loans: Poor Entrepreneur’s Boon

Filed in archive Information on May 4, 2010

© Rachel from Cupcakes Take the Cake

Microloans, as the name signifies, is a loan of relatively small amount disbursed from Microfinance institutions to develop or to expand the informal business by "entrepreneurial poor".

The unique concept of disbursing small amount of loan as low as $100 accelerates to increase the profit of the borrowers. This concept is instrumental as it helps people to overcome their state of extreme poverty and also helps them to fight against the hardships of life . The disbursement of microloan was first denoted by Recife, Brazil, by an ACCION led nonprofit, in the year 1973.

Today, microloan repayment rates for ACCION's partners worldwide gains an average of 97 percent. The process of borrowing loans are different from the loan disbursement system of traditional banks. Here institutions measure the business willingness of micro entrepreneurs and their ability to repay loans. Microloans are specially targeted to help the poor to live by self employment.

The poor can feed their families, can start selling fruits in local market, weave clothes and can open small bakeries. Now, borrowers are paying their first small loans and going to borrow for larger amount of loans, that clearly vindicates the success of the Microloans program.