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This whole section on microfinance should be reconciled with the Microcredit page. Please keep an overview of what microcredit is and its pros and cons on this page. I also added a link to the microcredit database below. Please use proper wiki headings (h2., etc) |
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What is Microcredit?
The provision of small loans or microcredit to poor people to help them engage in productive activities including growth of very small businesses is called Microcredit. The term may also include a broader range of services, including credit, savings, and insurance. A database of Microfinance Organizations is maintained by the AguaClara Fundraising group.h4.
Central American Microcredit projects already in existence
In general Microcredit projects can range anything between lending to an individual to implementing a project which would help the whole community at large (generally with the aid of the government or a Non-governmental charitable institution). The current Microcredit projects in Central America are mainly concentrated on small size businesses. Microcredit in Central America has been growing at a steady pace of 20% in the last decade with Honduras among the lower end of growth spectrum.
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Is there a citation for this 20% stat? |
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How does Microcredit work?
All the Microfinance organizations in Honduras seem to follow the Grameen model for lending purposes, in this model an organization assigns a number of officers to a community to familiarize with the situations on ground and gather loan applications. Once the loan applications are reviewed they decide on potential borrowers (usually the limit is 5 people) and form a group of with all them as members. Then they give money to 2 members of the group (the loan could range from anything between $50 to $5000) and monitor repayments for a two year period. If the two borrowers do return the money on time they extend the loans to everybody else in the group, this dynamics creates a peer pressure among the borrowers to make payments on time.h4.
How can Microcredit can be used to help AguaClara?
Many of the Honduras villages have a Water Board that keeps tax records. The Microcredit institution could verify their credit worthiness and provide them the initial investment required to build the water treatment plant and pay the salaries of the AguaClara/APP employees working on the project.h4.
What is our current position about Microcredit?
Even though the potential applications of Microcredit to fund the building, maintaining and commercializing Aguaclara plants is immense the difficulties associated with organizing a community of people to apply for Microcredit, the time between application for funding and receiving the money and the size of funding provided by the Microcredit organizations is a barrier. After deliberation in class for now we have decided to put a hold on further exploration of Microcredit as a funding option and focus more on traditional funding sources like Grants.