January 3rd, 2007

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Little Loans

I've been interested in the idea of microcredit for several years, since reading the book The Price of a Dream The story of the Grameen Bank by David Bornstein. You may recognise the name of the bank, since it was in the news recently as a joint Nobel peace prize winner. The idea of microcredit is that small loans are made to people who have no collateral to be able to get a loan from an ordinary bank. A common practice is for a group of people to get together in a loan club, and for one person to ask for a loan while the others support them. This brings peer pressure into the equation which can raise concerns of harassment within small communities. Also the amount of administration that is required to administer a small loan means the interest rates can be quite high, although not as exorbitant as those of local moneylenders. My personal opinion is that it is a worthwhile way of helping to relieve poverty.

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