Microfinance can also be known as microloans or microcredit. Both are the name given to bank systems set up by western countries in the third world. These banks provide loans totaling between 100 and 1000 dollars to aspiring businessmen and businesswomen in countries such as Azerbaijan and Sierra Leone. After the businesses have started up and become successful, the businessmen may pay back their loans and take out larger loans to expand their businesses. While this may sound like a bad investment, the surprising truth is that the loan payback rate is over 98%, considerably higher than in weastern banks. What this process does is create a ground-up grassroots economy in third world countries to reduce their need of sweatshops to start up an economy. The two best known microloan banks are the Grameen Bank owned independantly by Mohhamed Yunuys, and Kiva which is a bank the public can personally donate to. Kiva is a unique donation system in that the donaters directly decide the very person their loan goes to and then genetrally gets their money back within a year. Below is a video explaining the concept of microloans.
Loading...