Loan Process

Through a rigorous loan process, loans focus on aiding the poorest of the poor (who would never be considered as potential borrowers by traditional financial services), those who are unemployed and barely scraping by. Typically, first loans are equivalent to about $5-$15 American. It is difficult for many to fathom the magnitude that this small amount of money can have. The CEO of Grameen foundation explains, “if 110 million people increased their per capita income by $3 a day, every day, that starts to become more meaningful on an aggregate level” (Hawser, 24). No collateral, credit history, or other legal paperwork is required for micro-borrowers to receive loans and the smallest amounts completely alter lives through the opportunity they provide. Many are able to break payment cycles they are stuck under, start their own businesses or even simply put a roof on their own home (Geodesudbury.com). Micro-loans open a world of opportunities for the poor who would otherwise be likely to die of poverty.
    Whether or not loans will be repaid is a chief concern and criticism in the field of Micro-lending. Yunus and Grameen Bank developed a system, to ensure the payback of loans from borrowers. All loans are granted to people in groups of five. If one person in the group fails to pay back his or her loan, the entire group is let down. The group dynamic allows borrowers to have support and encouragement from their community, helping to ensure loan repayment (Yunus). Yunus admits his loans to be risky, “’[borrowers] don’t have collateral, they don’t have guarantees, they don’t have lawyers, nothing. How risky can you get? Still, our money comes back,’” yet is confident in the process (Parker, 1).