Microcredits

Micro credits have, in many countries, proven to be an effective means against poverty and hunger. They can help to improve the lives of poor people who don’t have sufficient financial credit to get loans from a normal bank. Micro credits open the way for low-income households to improve their income situation by engaging in micro-enterprise activities. Many of the loan recipients have an income that is clearly below the one-dollar-per-day line. Often, they are simple peasants or handicraftsmen or women hardly able to read or write, let alone be eligible for a bank account. However, many of them are willing to set up a small micro enterprise to earn a modest living.

Loans can be handed out in cash or in kind: as seeds, animals for breeding, agricultural equipment or the like. Often, loan recipients are encouraged to organize themselves in groups or co-operatives whose members are under pressure to pay back their loans on time as otherwise group members will be held accountable for funds not paid back. In many cases, successful loan recipients having completed their loan contracts are eligible for new and higher subsequent loans to extend their business operations. The rates of paying back these loans are often above 90 percent, especially in the case of women who have proven to be more faithful than men in paying back their loans. Men are sometimes tempted to divert borrowed funds for other purposes.

Here you’ll find further information and background material regarding the topic of micro credits:

VisionFund - the microfinance subsidiary of World Vision
micro - the World Vision microcredit page
Microcredit: Investing in children's futures
Pulsschlag Kleinkredite 16/2005.pdf
World Vision Microfinance Vietnam