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17 Credit where it's due - Coggle Diagram
17 Credit where it's due
what is microcredit
Muhammad Yunas invented microcredit
a form of lending tailored to poor people
do not demand collateral
judge creditworthiness by assessing expected income
save officers time and hassle
people in this group know and monitor each other
to unleash their inner entrepreneur and allow them to earn their way out of poverty
in the 1990s and 2000s it was one of the next big things in development finance
the lending portfolios of MFIS are worth a combined $124bn
the industry is in trouble
Covid-19 is straining its finances
Repayments have plummeted
a crunch looms
growing complexity
new players in the fray due to a lengthening suite of services
Patchy regulation and loopholes
inability to meet high expectations
its effects on investment, revenue and consumption are small and uncertain
terrible timing
covid-19 will compel more people to turn to loan sharks and pawnbrokers, at the risk of falling into debt spiral
how people balance their income and expenditure is important
What to do?
in the short term
moratoriums, reschedulings or injecting capital
discuss with funders
loosen reserve requirements to provide breathing space
forbearance with struggling clients
in the long term
crack down on predatory lending
make rules more consistent and uniform