microcredit

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It is a way to finance people or microenterprises that need small amounts of money (quantities vary according to the country). It is a debt instrument that offers a specialized financial opportunity to a person or small business that does not achieve the minimum requirements demanded by the traditional sources of credit (banks, lenders, creditors, etc.) to facilitate the access to financial services (loans).

Microcredit was created as an experiment developed by Muhammad Yunus in 1974 to reduce the exploitation to which 42 villagers were exposed to in Bangladesh. Its success carried him two years later to set up the Grameen bank, which has extended all over the world as an option for families with scarce resources. The loans that correspond to the figure of a micro-creditor generally are used to invest in microenterprises, to strengthen work capital, materials, supplies, merchandise, equipment and tools, with the aim to improve productivity.

Nowadays, micro-creditor is not restricted to providing financial services only, but provides training in money management and reaches aspects such as leadership, trust, self-esteem, education, management of microenterprises, family planning, and organization of production and distribution of goods. Although, for the microcredit to be conceded, the project of the economic activity that wants to be done must have, beforehand, signs of productivity. microcredit is characterized for incorporating flexible guarantee procedures. The year 2005 was declared as the “International Year of microcredit” by the United Nations.

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Muhammad Yunus - Micro Credit Creator / Bangladesh

Muhammad Yunus - Micro Credit Creator / Bangladesh

Microfinance 101

Microfinance 101

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