Microfinance or ‘micro-credit’ loans are small dollar loans to low-income entrepreneurs and business owners who may not meet the criteria for traditional bank lending. These loans extend a hand to those who, despite having a sense for enterprise, may lack access to credit or fundamental financial knowledge. With this capital, businesses can purchase new materials, increase employment, or upgrade equipment. Micro-loans enable small business owners and entrepreneurs to invest in and grow their ideas and futures in a safe and affordable way.
Microfinance is unique in that it creates a personal relationship between the lender and the borrower. In many cases, in addition to the loan, the lending organization offers financial assistance and guidance in an attempt to ensure that the borrower is best equipped to receive, use, and repay the loan on time. This effective business development allows borrowers to gain financial independence and further their managerial skill set, leading to credit growth, income growth, sustainable employment, and a richer and more dynamic community.
Microfinance has grown rapidly in recent decades following its success in enabling impoverished people to build wealth and stability in third-world regions such as Bangladesh, India, and Ecuador. Microfinance in the United States is a relatively new concept, but is catching on quickly. By giving American small businesses the opportunity to flourish, micro-credit makes a palpable impact on the economy, community wellbeing, and lives of individual entrepreneurs.