Micro Loans In New Zealand
Some less privileged people do not have access to any financial services. For this reason, microloans are therefore a way of ensuring financial inclusion and also as a strategy to eradicate poverty around the world.
A microloan (microcredit loan) is a form of credit facility offered to small business owners through microfinance to enable them to start up or expand their business venture. They are meant to help people who would otherwise not afford a loan from conventional banks.
How it Works?
Loan application: the borrower approaches the microfinance for a loan. They submit their application including identification documents, the amount they wish to borrow, duration of the loan and purpose of the loan, etc.
Loan approval: the submitted loan application goes through undertaking and approval process to determine whether to lend, how much and for how long. Most microfinance institutions offer training before they disburse the cash, to empower the borrower. They also follow up on the business progress to ensure the borrower is successful in their venture.
When to choose Microloan
For a business in the underdeveloped region.
For small business start-ups
For an already operating business that needs to bridge finances.
For a business with poor credit history.
pros and cons of micro loans
Pros of MicroLoan
The borrower can access credit regardless of their credit rating.
The interest rate charged is reasonable, sometimes even better than the banks.
Some micro lenders offer training to the borrowers to ensure empowerment on financial literacy
Some individuals use the loan for household need and to pay off other debts, forcing them to live in an unhealthy cycle of debt.
In the case where an individual is unable to repay their loan, individuals are forced to sell their belongings hence sinking deeper into poverty.