Microcredit: Online Services

Microcredit is extended to low-income persons who wish to own a sustainable business. Microcredit is different than a small business loan because it focuses on a business plan that can be immediately be developed to generate cash. Small business financing options through most banks are geared at establishing or expanding a business that has objectives for long-term growth. Most microcredit enterprises are aimed specifically at allowing for a person or a community to generate enough cash to live on a daily basis. There are many places to gain information on microcredit online.

How did microcredit Start?

Many believe microcredit started in Bangladesh where local farmers and merchants were given loans to open and maintain small operations. Similar models have been employed in low-income areas across the world through foreign aid. For example, there are groups who give aid to the slum areas of Jamaica or Haiti. These groups then teach a valuable skill that can immediately be turned into cash flow. The groups build a small shop where the work can be carried out and turn it over to a local person who receives the microcredit loan in the form of his or her own shop. In the U.S., microcredit is more likely extended in impoverished areas where there is an immediate demand for a product or service. Small trade stores are usually the best models for microcredit. If your goal is to start the next great tech company, microcredit may not be the best form of small business financing for you.

Where can I find more information?

There have been a number of studies nationwide that evaluate the effective of microcredit and determine how to extend more loans. These sources are easily found online:

  • The Journal of Microfinance is a collection of essays, research and opinions on the effectiveness of microfinance and its role in the future.
  • The Mercatus Center at George Mason University has dedicated resources to studying microfinance and publishes the results of those studies online.
  • Opportunity International is a Christian-based group that works to extend microcredit worldwide.
  • The Microcredit Summit Campaign is an international effort to create social impact through local loan initiatives.

Most small-scale local banks and lenders will not be well-versed in microcredit. Relief organizations and those lenders with a specific microfinance agenda are the best places to look for more information.

Where can I get a Loan?

If you think a microcredit loan is the right thing for you or your community, seeking a loan is a difficult process. The factors for granting your loan will be different than with traditional financing applications and will be more similar to writing a grant application. You will have to locate grants in your community that provide low income business loans, then submit an application as to why you are the right candidate to receive those funds. In most cases, the grants will be extended to a community and not to a sole person.