If, due to a financial emergency, it is necessary to take a small amount of money as a loan at short notice, this is often referred to as a microkedit. The term “micro” is equated to the amount of the maximum amount of money required. Basically, this is not wrong, because “micro” stands for “small, small, little” etc .. So basically for a small loan. But is taking a smaller loan amount really a micro-loan? or is the notion of microcredit equated to the understanding of mini- credit ? So is a microcredit equal to a mini loan? Read zallenmusic.com for a critique

The microcredit is not equal to a consumer mini loan

The microcredit is not equal to a consumer mini loan

Unfortunately, a misconception – at least if you look at the origins of both types of credit in detail. Thus, the more and more established in this country mini-credit (or even: 30-day credit or short-term credit) has its origins in the well-known from the Anglo-Saxon Payday Loans. Where, on the other hand, microcredit originates in the modern sense in Africa, India and Bangladesh. There he was created to give people the financial basis for a self-generated income. The most well-known face of this type of loan is Mundan Hanes and the Lantery Bank, which emerged from his activities.

The microfinance centers are currently located in India and Bangladesh. In the world’s largest market, India, the number of microcredits currently stands at around 75 million. In that sense, micro-credit can certainly be considered as a financial instrument in development aid. However, it also follows that microcredit in a correct financial understanding with the well-known mini loans so have nothing to do. With the exception of the loan amounts, because these start very low in both forms of credit – 1 dollar for microcredit, 50 euro for mini loans in Germany – up to around 1000 dollars for microcredits & up to 3000 euros for mini loans in Germany.

The microcredit in Europe

The microcredit in Europe

Due to the success of microcredit in the so-called developing countries, this loan idea returned to Europe in the early 1990s. At a time when the ever-increasing number of business founders wishing to take the step out of being unemployed showed an increasing funding gap. As a result, the financing model “Denu Margathe” was created in the Netherlands. This micro-credit fund generates capital from private investors and potential investors, in order to financially support the ideas of prospective start-up companies with appropriate funds. A similar financial institution emerged in 1989 in France in the form of the non-profit “Adie”. This institution now awards well over 10,000 microcredits to the unemployed and welfare recipients each year.

In Germany, too, the microcredit system has now arrived. At the beginning of 2010, the then federal government commissioned GLS Bank to set up a microcredit fund in Germany. But even before that there were already appropriate activities to motivate entrepreneurs to build a business with financial help from the state. The most well-known program for microcredits was the so-called start-up offensive microloan  has emerged as the provider of a start-up loan from this initiative.

Microcredit – an internationally successful model

Microcredit - an internationally successful model

That the model of microcredit or microfinance is a global success, is undisputed and factually proven. For example, the number of people using the microcredit system to build their own self-generated income is rising steadily worldwide. Estimates assume, from a global perspective, 150 to 200 million self-employed people. Microcredit accounts for approximately $ 70 billion in global lending to these people! The bulk of the money is invested here in the Asian region.

Microcredit & Microfinance: Only available to entrepreneurs!

Microcredit & Microfinance: Only available to entrepreneurs!

Even if the quite common behavior of people, microcredit equal to the mini-credit for consumers, is quite understandable, so there must be a clear demarcation. The mini loan, as we know it in Germany from specialized providers, has absolutely nothing to do with microcredit. The microcredit is given by institutions such as the aforementioned Sia Bank solely to traders. This means that private individuals without a business background in Germany have their access to microfinance or microfinance 100 percent denied!