Lending To The Poor
“If you lend to the Poor, you lend to the Lord! And the Lord pays wonderful interest to your money”
– Â The Bible
Small business loans is regarded as one of the most effective poverty alleviation tools available in the development of a country. Business loan is one of the first steps towards poverty alleviation. It is more focused in the ensuring that the poor businessmen will have initial resources to be able to generate income and at least eat three times a day. Access to productive resources like Business loans creates this opportunity.
Businesses availing of small business loan must be very careful with its repayment and avoid delinquency. Trust is a big factor. Business progress caused by these loans can really happen if the economic activity is more permanent and has growth potentials. The growth of the economic activity will ensure that the poor businessmen will also grow with it, including other individuals that depends on it – workers, suppliers and even the distributors.
It’s often been said that lending to small businesses is a risky business. Traditional lending programs and regular bank products does not fit the needs of the small businessmen. The informal moneylenders or “Bombay†Indian moneylenders or 5-6, the financial service providers who really understood the small businesses, proved to be the key in reaching out to the poor effectively.
These are usurious practices. Usury that was previously considered as a burden to the poor businessmen has emerged to be main success factor in lending to rollover their businesses. High interest rates cover the risk and provide for the sustainability of the lending program. Small business loans has evolved from a social development program into a commercial endeavor. So banks are into it now. They saw the potentials of lending to these small businesses.
