Micro lending – how money is reaching out to the bottom of the pyramid
Muhammad Yunus, a Bangladeshi economist and founder of microlender grameen bank, describes the practice of micro-lending as “If banks lent to the rich, I lent to the poor. If banks lent to men, I lent to women. If banks required collateral, my loans were collateral free”.
2006, this micro-lending pioneer won a noble peace prize for his work.
Capitalist system: Make the most of resources, opportunities available and be as rich as possible, as if there’s no tomorrow. Golden door to wealth or self-sufficiency is open only to those who have a solid background or meet certain specified standards. (A sad epiphany)
For some micro-lending is a noble concept, which does not work in real life. It is noble in a way that micro-lenders lend money to the indignant, those without any financial support or without any work experience. This breaks the myth that poor cannot be trusted to pay back the rent!
Historically, the drive to alleviate poverty marked the inception of micro-lending. For a lady living in an isolated village where there is not even an iota of financial help, the concept of micro-lending offers her to drastically change her life, thus availing the minimum amount of loan to support her bare necessities.
Had this micro-finance not existed, thousands and lakhs of men and women like her would have made it back to life.
There are two sides of lending business,
1. Either you just want your money back within the agreed-upon time; you will not give a damn about how hard your borrower’s life is. After all a lender, in the truest sense, is a capitalist. Best way to ensure that you’ll make a deal out of it is by lending to those who are most likely to repay the loan. Hence the minimum standards and basic interest rates imposed.
2. Second is a more philanthropic approach in this business. You take a major risk by lending to those in dire need. You loan a small amount (micro) and change not only their financial status, but also their mental attitude! The repayment of loans in this case is as higher as the traditional loaning institutions.
Micro-loan is often made by an individual rather than by a lending institution. Micro-lenders are mindlessly risky, lending to low-income entrepreneurs in small amounts.
Micro-loans become a god option for those who
1. Cannot avail traditional banks financing.
2. Have no support system
3. Cant pay high interest rate