Microcredit 101
(Success) — Traditional banks only loan money to the rich, says Muhammad Yunus, who founded Grameen Bank with the idea of doing just the opposite. By granting millions of small loans to poor people with no collateral, Yunus helped to establish the microcredit movement across the developing world. This revolutionary way of lending money may have had its start in poverty-stricken areas of the world, but the concept of microcredit, or microlending, is quickly finding its place in the American economy.
Most banks don’t bother granting business loans less than $50,000 because there’s not enough profit to balance the risk, according to a recent article in The New York Times, detailing the increase of microlending in today’s tight credit, recessionary market.
By giving loans to people who wouldn’t otherwise be able to get money from traditional banks, microcredit provides options. Small-business owners can now expand their companies, buy new equipment, or just get the help they need to weather a dry spell in cash flow.
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