Does Microcredit Really Help Poor People?

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Borrowing has never really been seen as a conventional route out of debt. It can easily turn into a spiral of missed payments, increasing interest, and more and more doors closed as you run out of options. However, microcredit is simply a fact of life for many people. It can provide the breathing space a family needs to stay above the breadline and can offer investment funds to people who would otherwise be unable to make use of them. However, the stats aren’t as comforting as we might think, and plenty of experts feel that debt, no matter how small, stifles any chance of moving out of poverty.

The key fact is that in many cases, microcredit is intended for investment into something productive. It can provide small business owners with the funds they need to guarantee an increased return at a later date. However, a lot of the time, the money ends up going on consumables or unnecessary products. The result is an instant loss of an investment opportunity and the prolonging of the initial problem.

It’s Easy for Problems to Spiral with Microcredit

Similarly, it’s easy for a loan shark structure to spring up using a service such as The debtor effectively becomes a middleman between the bank and those even less fortunate than themselves. The result is a structure that prolongs the debt of others, and opens a door for extortionate interest rates while seeing useful funds allocated with zero regulation.

The fact is, while a loan in the right place can make all the difference, debt is a major cause of poverty and social stagnation. Microcredit may help people get out of a jam, but if they come to rely on it, it’s clear that there’s nothing good down the line.

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