What exactly is micro-lending? And how does it work?

Answer 1

The idea has been around for a long time, so there are several variations. But it started in third world countries, and with the success they try it a lot in the Western World.

It fills a gap, Small loans are not worth a bank's time. And given that poor don't have anything to put up as security - like a house or a car, it is even higher risk. On the other side, to the extremely poor, starting with a little could make a huge difference.

Most form a lending circle. A group that has control of the money. They may have saved it. Like if 10 people saved $20 a month. After a year have $2,400 to lend out. Business training was genereally provided to the group over the time. Or if the group of 10 went to the bank, they might be a better risk than if one person went. Or many other times, it is a government or charity program and the money is given to the group.

From there it is peer pressure. You decide who to lend the money to first. They have to pay it back, then it is lent out to the next person in line. So there is the pressure within the peer group to pay it back. Better security than a car.

But it is now a buzz word used any time their is smaller sized business loans available.

Answer 2

It is about lending small sums to small entrepreneurs who in turn invest the money in micro-businesses, viable enough to repay the initial capital. At some point can be blurred with self-employment initiatives.

Answer 3

An extremely small loan given to impoverished (poor) people to help them become self employed. Also known as microcredit.

Try this website:
http://en.wikipedia.org/wiki/Micro_lending

Answer 4

How U get paid at McDonalds, they also only use mcmoney.

Answer 5

it provides loans to people who don't have collateral.