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What Is Microlending?

Microlending is the practice of offering loans to people in need, with the purpose of enabling them to take steps in being self-sufficient. This practice is a very interesting topic for economists and social workers alike, as it involves many different principles. Microlending involves very small amounts of money as compared to the regular business loans, but it has proven effective in helping those in poverty to stand on their own feet. Microlending is often practiced in underdeveloped countries, but is also existent in developing and developed nations. Microloans is the term that is used to refer to the loan extended in the practice of microlending.

There are many different entities that engage in microlending. Sometimes, commercial entities also engage in microlending, but more often than not, not-for-profit organizations are the ones that are involved in microlending. Furthermore, organizations that offer microloans usually depend on the goodwill of others to fund their operations. It is not uncommon for microlenders to source their funding from private donations.

While the idea behind microlending is to equip the poor to make a living by offering money, it is important to remember that the money offered is still considered a loan. Even though the amounts involved are quite small, the borrower is still expected to pay the loan back in time. This is one way of imparting accountability and entrepreneurship to the recipients of the microloan.

The concept and intention behind mircrolending is a noble one, although it is not exempt from issues and complications. In general, however, it has proven to be successful and has helped many a poor family to improve their way of life.

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