Guest Post: Save the World With $20?

by admin on October 8, 2012

The following is a guest post from Allison Morris (alli.morris85 [at] gmail [dot] com).  Be sure to check out her awesome info-graphic on microlending below the text:
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Can you save the world with $20? You absolutely can. Learn something about the world of microlending, the practice of loaning small amounts of money to those in developing countries. With only 3,600 microlenders serving 75 million people around the world, it’s clear that this trend toward providing access to credit for the unbanked is one of the best and only ways to combat the poverty and debt cycle experienced by so many worldwide. Microlending builds economic equality for women, especially — women who, in Africa, make up 60% of the rural labor force, yet contribute up to 80% of food production for the continent. 82.3% of those seeking microloans are women, many with families that lack the means to break a vicious poverty cycle without access to proper credit and banks. While microlending doesn’t require collateral or a credit history to serve its lenders, a mere $27 loan is enough for many to rise out of poverty. And with 3 billion people in the world lacking access to proper credit, and only 4% of those currently able to escape poverty, there’s a definite need to break the practice of local loan sharks overcharging for expected weekly loans.

While the microcredit process isn’t perfect, non-profit microlenders such as Accion International, the Women’s Initiative, Business Center for New Americans, and microcredit pioneer Grameen Bank, exist to serve those in abject poverty while also providing incentives for people to save. While for-profit lenders use aggressive collection methods to maintain a 95% repayment rate and often charge over 125% interest, the non-profit lenders charge interest rates barely upwards of 10%. Non-profit lenders avoid lending sums over five times the borrower’s income, which is a common practice of the for-profit loan sharks. While microlending might be able to change the world for the better, it’s the non-profit lenders to look to if you’re trying to make a difference, or escape the poverty cycle yourself.

(click the image below to see it full size)

Haiti Microcredit

(graphic brought to you by CreditScore.net)

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