A micro loan is one of the many buzz words for the new century. Essentially it is a small loan, often less than $ 1,000, to someone extremely poor. Many times these recipients are in third world countries struggling to make better lives for themselves and their families. A loan may be to a group of women who want to buy another loom for their weaving co-operative in a small African town or it may be used to help a herder purchase another male goat for breeding purposes. Pictures and stories often accompany the loan request, which is generally filled out by an aid worker from one of many non-profit organizations working in the area.
When investing in these small loans, rest assured that there is an interest rate charged and payment is mandatory. The loan terms are usually short, three years or less however many are paid back well before the due date as a matter of pride. In fact, the default rate is remarkably low on these loans. Often, the money invested can be spread out some several requests, allowing the investor to contribute $ 25 to four different causes, for example, to minimizeize his risk and to maximize the number of needy that he can help.
Most investors do not choose this form of investment solely for the return on their money but rather for the return to mankind of something good and needed. In fact, investing in these loans is a great way to introduce children to investing. Letting them peruse the requests and make decisions can create a sense of respect for what they have in their life and a desire to help others, all while learning the value of a dollar. Children taught the benefit of investing early will be careful with their money and more conscious of the ramifications of their financial decisions in the future.
Many micro loan companies have strong web presences and are transparent in their record keeping to ease the minds of those interested in investing in micro loans. For investors looking to help in an impoverished nation or those who simply have very little to invest, a small loan can be a great choice. There are, in fact, some companies that specialize in micro loans to small business owners in the United States as well. The options are endless and the possibility to help someone while still making a return on your money is a win-win situation.
Sean L Johnson