Microcredit-a credit in itself

A few days back, I read a wonderful article on ‘Microcredit’. I just had a little idea of this concept and that too, was known after Mohammed Younis of Bangladesh got Nobel Prize for this revolutionary idea in 2006. As the name suggests, it is lending a small loan to the people, but the catch-point is that the borrowers are generally poor people deemed unfit for loan-credit by the established money-lenders, viz commercial banks, institutions etc. Furthermore, the borrowers don’t have to deposit any collateral or securities.

Well, there is nothing like free-lunch in this world. And, unless you are doing charity, there is no point or motive in giving money with a great doubt over it ever coming back. Microcredit institutions were/are brave enough to fight this skepticism and in the end, have largely been successful. Small loans, some as low as $10, are given to people to start a new business or enterprise to generate income for them. The people in want of money generally know what money is like, and so, more often than not, with the help of credit institutions, have been successful in not only starting and running their small businesses, but also repaying in time. The peer pressure of the borrowers also helps in utilizing the money properly and returning it on time. The credit institutions have been smart enough to select women only as the borrowers since they are more money-savvy and diligent.

The above is not such a grandiose and novel idea, but it is just a reaffirmation of the theory that output can only occur if there is an input. Most of the people in our country and other poor countries suffer because they don’t have enough money to start with. Even if they have and invest it somewhere, they don’t have any guard against failure. Then the vicious cycle of debt, high interest money-borrowing, further debt, pressure, suicide etc gets built up. ‘Microcredit’ theory has tried to break this.

It has gained more credence and popularity in the last few years. In fact, I found one site too, Kiva, which does this type of micro-financing. There is another one called ‘Microplace’. People have been so fascinated by this idea that they consider it the most potent way to alleviate poverty. Add me to the list too.