Micro Credit: Definition and Tips

Aimed at people who need financial assistance to carry out a personal or professional project but do not meet all the conditions issued by banks, micro credit is a small loan. It’s a quick and easy way to get financing for projects in a hurry. But who can enjoy such help? How long is it ? Who to contact to get it? Let’s discover together the different aspects of this type of credit.

What is Micro Credit?

What is Micro Credit?

Microcredit is defined as a simple financing solution, created for certain types of people. Its purpose is to allow them to access financial assistance, even if it is a small amount, from banking organizations.

It made its appearance in the developing countries but it is especially in Asia that it became popular thanks to the Grammen Bank.

In France, it was in the late 1980s that he landed, reserved for individuals and entrepreneurs with very low incomes but who wish to create and develop their own business.

Who is it addressed to?

Microcredit is particularly suitable for people who can not access the services of traditional banks, because of an unstable job situation or low or even low incomes. These include:

  • Unemployed,
  • Precarious workers,
  • Employees on a part-time contract,
  • People receiving social minima, etc.

In short, people in financial difficulty who urgently need loans to meet certain expenses.

This credit is also intended for people who have enough income to benefit from social assistance but insufficient to obtain a consumer loan from a traditional bank.

Also note that a micro credit can not be used to pay back rent arrears or for the purchase of any entertainment device such as a TV.

What amounts can we get?

As we can imagine, with a micro credit, we can only borrow small amounts, usually between 300 USD and 5000 USD if we choose the micro personal credit.
The amount can extend up to 10000 USD for a professional micro credit.

The loan can be used to finance the purchase, rental of a car, a household appliance or heating essential such as a boiler, vocational training, a driver’s license, tuition fees, medical care. health that are not reimbursed or the purchase of consumer goods as a PC in the course of his work.

What are the rates and for how long?

If you opt for personal micro credit, the interest rate is between 1.5% and 4%, over a repayment period that ranges from 6 months to 36 months.

With a professional micro credit, on the other hand, the minimum rate is 5%, over the same repayment period. This duration is calculated on the basis of the project in question and the resources of the borrower.

Unlike a conventional loan, there are no insurance fees or fees with a micro credit. And no penalty is imposed in case of early repayment.

How to obtain a Micro-Credit?

How to obtain a Micro-Credit?

If you think you are a microcredit eligible person, here is an overview of the steps to take to benefit from it.

First of all, we do not go directly to the bank to obtain a microcredit. You must necessarily go through an accompanist, who is most often in the form of associative actor.
The role of this intermediary is to reassure the bank with a view to facilitating the obtaining of microcredit.

The guide will receive you, analyze, study your request and see if your project deserves to be financed. Then he will mount the file with you and bring it to the potential bank.

Once the credit granted, the escort must follow with the borrower the smooth progress of the refund.

Who to turn to for a Micro-Credit?

Who to turn to for a Micro-Credit?

To subscribe to a microcredit, the person must obligatorily go through a social support network that will help him build his application file before presenting it to the approved banking institution, approved by the Social Cohesion Fund.

This social organization can be:

  • A district management,
  • A municipal center of social action in connection with the town hall,
  • A family association,
  • Solidarity associations, in particular the Restos du coeur, the Red Cross,
  • Temporary agencies,
  • Homes of young workers, etc.

You can also go to funding platforms like astro to help us get that kind of credit.