As someone interested in starting a business, you need resources and capital. So what to do in these cases? If you’re like most French people, head to your bank and ask about a loan or look for investors. Although you can successfully obtain a traditional loan, if you are considered low income, the odds are stacked against you. This is where microfinance comes in. Microfinance has been defined as the provision of financial services accessible to low-income people. This type of loan helps aspiring entrepreneurs generate income, build assets, manage risk and meet household needs, according to Western Union.
History of microfinance
Microfinance has existed for centuries in one form or another, and even longer in Asia as a form of informal lending. What we know today as microfinance was born in the 70s in the country of Bangladesh. In the midst of a famine, Dr. Muhammad Yunus, a professor of economics at the University of Chittagong, had become disillusioned with abstract theories of economics that failed to explain why so many of the poor were starving to death in Bangladesh. To learn about micro-finance in practice, see https://www.micro-credit.biz/.In the village of Jobra in Bangladesh, the professor discovered that a group of 42 women were making bamboo stools but had no money to buy the raw materials for the stools. As a result, the women fell into a cycle of indebtedness among local community traders. Shopkeepers would lend the women the funds they needed with one stipulation: they would sell the stools for little more than what the raw materials cost. The $27 came from all of the borrowing needs of the 42 women combined. Yunus lent them his own money, allowed them to sell their saddles, and got them out of their debt cycle. Microfinance evolved with Joseph Blatchford, former head of the Peace Corps and law student at UC Berkeley. Blatchford founded Accion, a nonprofit, as a voluntary project in 1961. In 1973, his organization began offering small loans to entrepreneurs in Brazil to see if a one-time influx of money could help them get out of poverty. The operation was a success: 885 loans made it possible to create or stabilize 1,386 new jobs. Accion expanded the model to 14 other Latin American countries over the next decade.
Where can I get microfinance?
This specialized form of financing is available from microfinance institutions in the form of small non-profit organizations and larger banks. The most popular places are General Electric Consumer Finance, Citi Inclusive Finance, Kiva, Accion and BRAC. Also, be sure to check out our reviews of the best alternative small business loan resources. When you talk to lenders and get a small loan, you can also expect help opening and maintaining a savings account. A good lender will provide you with the tools to repay the loan. Although microfinanceis often discussed in the international context, there are several lending institutions in France that provide these types of loans to increase economic opportunities in local communities. Many CDFIs (community development financial institutions) offer microloans to the communities they serve with favorable terms for small businesses, and they provide counseling resources and financial education to help increase the borrower’s chances of success.