Micro-credits are something we associate with third world micro-enterprises, but could they make a difference in the western world in this time of restricted lending?
Micro-credits, loans of under about £500, are not something I’ve ever needed to take advantage of, but they transform many many lives in poorer parts of the world with a lending infrastructure less accessible to the individual than our own. They have those beautiful qualities common to so many damn good ideas: simplicity, relatively low risk, and philanthropism. I’ve recently contributed my thoughts to this article on the HSBC Knowledge Centre site.
The large loan culture
We rub shoulders with small businesses and start-ups all the time and it’s so clear to us that financial obstacles can be so small as to be completely invisible to the official bodies set up, supposedly, to help them. At a talk I attended recently on the replacement of RDAs by LEPs, it was made fairly clear that small businesses may as well not exist for all the financial help there was available that was really genuinely designed with them in mind. A grant of a million pounds? Now you’re talking. £2000 to buy kit, get samples made or cover customs charges? Sorry, not worth getting out of bed for.
With banks unwilling to take risks, where does that leave the small business? Add in issues such as a bad credit rating or inexperience dealing with financial institutions, and the individual wanting to start a business can be left with few options.
Availability of micro-credits
Micro-credits are now available in the UK through several initiatives and projects, including through the Community Development Finance Association. With disadvantaged people the core market of this type of loan, flexibility with an individual approach and a people focus are, refreshingly, the norm.
The article ends with a comment of mine:
“Microcredit could take off in a big way in the UK, particularly in the current environment,” [Heather Donenville] concludes. “One person’s microloan is another person’s fortune – it can make all the difference.”