I’d like to add that there are good versions of “microloans”! I learned that there used to be (or still are, didn’t check) non-profit " banks" in some parts of India (and South africa I think) that would give out small loans of a few dollars to a few hundred dollars (which can be quite a lot of money in India). There was no collateral and low interest, but a group of people had to apply for a loan together. Until the first loan was paid back, the rest of the group couldn’t apply again.
It was meant to provide financial backing and capital to microbusinesses (e.g. fishers, farmers, peddlers) that would otherwise be excluded from the financial market due to a lack of collateral and otherwise be forced to take high-interest loans.
SHGs (which is what you’re talking about, also called SBLP in some places) are not a majority, their lenders/borrowers are often people within the same marginalized group, and it is very slow, so people tend to avoid them. MFIs dominate the microloan industry, and they’re very exploitative.
I’d like to add that there are good versions of “microloans”! I learned that there used to be (or still are, didn’t check) non-profit " banks" in some parts of India (and South africa I think) that would give out small loans of a few dollars to a few hundred dollars (which can be quite a lot of money in India). There was no collateral and low interest, but a group of people had to apply for a loan together. Until the first loan was paid back, the rest of the group couldn’t apply again. It was meant to provide financial backing and capital to microbusinesses (e.g. fishers, farmers, peddlers) that would otherwise be excluded from the financial market due to a lack of collateral and otherwise be forced to take high-interest loans.
SHGs (which is what you’re talking about, also called SBLP in some places) are not a majority, their lenders/borrowers are often people within the same marginalized group, and it is very slow, so people tend to avoid them. MFIs dominate the microloan industry, and they’re very exploitative.
Thanks for the info! I didn’t think they were widespread, but figured they might be a bit wholesome and would light up this thread :)