What You Need to Know About Micro Loans

micro loans

Do you remember the time when the only mention of micro loans considered a sort of community development programs somewhere far away? Luckily, times have changed. And that’s not the case anymore.

A 27 Dollar Micro Loan

Whether you know or not, yet the history of micro loan goes back to the late 1970s. It began with a $27 loan, in Chittagong University, Bangladesh. Dr. Mohammad Yunus found that namely $27 is enough to enable the women to sell their stools for a reasonable price. In the end, it helped them break out of the cycle of debt with local traders.

Obsessed with a big idea to use the money to make money, he decided to lend money. Thus, with zero interest, he lent money from his own pocket (something like loans for bad credit deal). As a result, the Grameen Bank was born.

Translated literally as Village Bank, as of May 2008, it works in over eighty-two thousand villages with !Attention! over 7.5 million borrowers. Still, it remains entirely self-financing with the borrowers’ deposits covering the costs.

Besides, awarded the Nobel Prize in 2006, he inspired competition within Bangladesh and imitation beyond. As a result, it led to a steady stream of new innovations in the name of serving the poor. Including savings accounts and more flexible loans.

Rapid Growth of Micro Loans USA?

Soon after the success of Grameen Bank, the number of new micro-finance institutions had increased dramatically. All around the world. Some of them are funded by grants, others – from public or private sources. Anyway, since then, considered as a potentially viable business, microfinance gained its position.

Time went on, and by the end of 2008, nearly $15 billion of foreign investment had been channeled into micro-finance institutions. Currently, products such as micro loans are seeing their popularity increase.

Since the financial crisis in 2007, personal micro loans have been taken off in the US, attracting thousands of clients who hadn’t qualified for credit cards or traditional bank loans. As of 2013, there were 6 Grameen branches in New York, Los Angeles, Omaha and Charlotte, N.C., with over 18,000 borrowers. ()

Besides, non-banking financial institutions had the largest concentration of borrowers with 35%. For bank institutions, the number had reached 33% of global borrowers.

All in all, innovation in microfinance has continued to evolve. Today, according to the World Bank report, about 160 million people in Developing Countries use micro loans.

Micro Loans Investment Services and Their Interest

In 2016, the number of micro loans investment institutions had reached 1323 million low-income clients at a global level. Funded by a community of thousands of investors, they fill a needed gap by offering micro-loans. In fact, not only micro loans but also a wide array of other small loans.

“When you invest, you expect to get something back. With this investment, you also know that you made a difference in someone else’s life. It’s an investment that grows in your heart.” Mary Clive, investor

Similarly, micro loans give a chance to many small businesses that don’t need a lot of money or have large capital needs to get the ball rolling. Moreover, it can solve their problems when getting the businesses off the ground from day one. So, if such small enterprise has sufficient cash flow to support a loan payment with no declared bankruptcy cases in the past 24 months, it may qualify.

Well, investors looking to take advantage of microfinance investments have great choices, indeed. In fact, it’s easy to find a big number of online micro loan investment services around the world.

Thus, by investing minimum $20 in schools and nonprofits, it takes a little more risk to earn 4% or more. Indeed, depending on the type of project and region of the world, the rate and the term of the investment, interests vary.

That’s why small firms and entrepreneurs are turning to an alternative source for financial products – micro loans investment programs.

What Do Micro Loans Stand for?

Have you ever wanted to apply for a micro loan? Now, onto the good news: anyone can apply for it. To get you up to speed about what a micro loan in particular is, keep reading.

Well, both micro business loans and personal micro loans enable people to use the money to make money. At the end of the day, they can create something sustainable long after the loan is repaid.

Besides, the best thing about micro loans is that it’s internationally renowned for its speed and simplicity of approving. But what makes this micro loans cooler – is the reasonable interest rate, from 5 to 18 percent. In order to connect all dots then, just think of 200 million among billion borrowers of micro loans in the US.

For every entrepreneur, it’s not a secret that getting a loan for small businesses is a rather tough challenge. Yet, by getting micro business loans, these small enterprises get a chance to manage their shortfall of cash. As a result, a lump sum amount can serve particular business needs.

The truth is that lending to small businesses is generally considered riskier and more costly than lending to larger firms. And what’s more, it does no matter what industry the small business is in. Recently, these risks became much more obvious as small businesses struggled to keep current on their outstanding debt.

According to the data from the SSBFs, small businesses tend to obtain loans, leases and lines of credit from nearby lenders. Convenience in the access to online lenders makes a difference in long-term relationships.

As of June 30, 2016, savings institutions held $54.8 billion in small business loans and $25.1 billion in micro loans, compared with $551.6 billion and $132.8 billion, respectively, held by commercial banks.

In 2012, the 10 most active lenders accounted for 84.5% of thrift micro loans outstanding. By 2016, the top 10’s share had increased to 88.9%. However, unlike commercial banks, the most active micro loan lenders are not necessarily the largest institutions.

In 2016, while the 10 most active lenders accounted for almost nine-tenths of thrift microloan dollars outstanding, they held only about one-sixth of total thrift assets.

Are You Interested in Micro Loans?

In general, the online lending market has continued to evolve and expand. To get you up to speed, the high sustained growth rate suggests that micro loans can help achieve high growth in the short term. What’s more, it is increasingly becoming an important source of credit for small businesses.

In fact, using micro loans is one of those trends that just seem to make sense. So, do you need a helping hand? Why not apply for a micro loan today?

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