Microcredit lending is one area with hidden opportunities which could be the most overlooked by financiers around the world today. Indeed the idea of lending money to the very poor may sound virtuous on the surface but at the same time, it does seem to be a very risky idea too! Why then would anybody want to lend money to the very poor to do business?
Source from (The Star Online): http://biz.thestar.com.my/news/story.asp?file=/2013/2/23/business/12737842&sec=business
Published: February 24, 2013
Indeed, there is a person who is credited with pioneering and propagating microcredit in modern times and his name is Muhammad Yunus: the banker and economist who hails from Bangladesh.
The very thought of microcredit for the very poor is deemed a virtuous act and Yunus won the respected Nobel Peace Prize back in 2006 for his efforts involving microfinance. His pioneering work has been duly recognised and even increasingly adopted around the world today.
The crux of the concept of microcredit propagated by Yunus is that the very poor who usually do not have steady jobs, nor a known credit profile history, are given a lease of life to earn a decent living to escape the vicious poverty cycle.
Yunus propagated microcredit in Bangladesh through Grameen Bank and the facility had mainly been extended to women (95%).
It is the women, Yunus said, who are more prone to suffer from poverty and were the most likely to channel their earnings towards the betterment of their family.
This second chance for the poor in the form of very affordable and reasonable financing rates for small amounts of loans will definitely help them start a small scale business and develop their entrepreneurial skills along the way.
Lower financing rates may mean quicker repayments and perhaps a chance for a better life for the poor while at the same time ensuring they are kept out of undesirable activities such as crime.
It’s akin to killing two birds with one stone but it must be noted that this facility could be open to abuse as well, such as phony applications or untraceable persons.
Financiers who choose this business route may view it as a volume game, making much economic sense in the bigger picture as there is usually a disproportionate number of poor in society today.
After all, giving a person a fish will feed him/her for a day but teaching the person to fish will feed him/her for a lifetime.
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