What Micro-Lending Is And How You Can Benefit From It

Micro-lending has been a hot topic in the financial industry for years. But for all its popularity, many people still aren’t familiar with what it is and how it works. In this article, we’ll explain why micro-lending is so good for both individuals and the economy as a whole.

Even more importantly, we’ll tell you how to get involved in micro-lending yourself and reap plenty of rewards along the way.

What is Micro-Lending?

A Micro-Lending or micro-loan is a small loan that is made to an entrepreneur, business or non-profit organization by a lender.

Micro-lending is a form of micro-finance. In this case, “micro” refers to the size of the loan and “finance” refers to the type of financing that takes place. Microloans are small loans made to entrepreneurs, businesses, or non-profits by lenders. They’re typically used for start-ups and growth capital rather than working capital needs.

In contrast with traditional lenders who focus on large projects with high returns, microloan companies lend money at low interest rates because they expect their borrowers to repay their debts in full without risk or collateral; thus they’re able to offer credit services more efficiently than other types of lenders.

 

Micro-lending can be used by both domestic and international borrowers.

Micro-lending is available to both domestic and international borrowers. While you may have only heard of microfinance companies helping people in developing countries, these entities actually exist all over the world. Microfinance institutions (MFIs) can be found online or in your local community, regardless of where you live.

You don’t need to visit a microfinance institution’s headquarters or meet with an MFI representative in person if you’re interested in applying for a loan from them; many offer their services online now too. The application process takes just minutes, so it doesn’t matter if you’re applying at home or on the road—you’ll be able to get started right away!

It’s also worth noting that some MFIs offer loans on an installment basis rather than providing one lump sum payment up front; this means borrowers will make monthly payments instead of paying everything upfront at once. If you’re someone who likes having options when it comes time making payments towards your debts (or any type of credit), then this feature might appeal directly towards your needs as well!

The purpose of micro-lending is to extend credit to people who are underserved by traditional financial institutions.

Micro-lenders often work with people who have bad credit or no credit, but who have a good business plan. These lenders can be non-profit organizations or for-profit companies. They’re more flexible in their criteria for granting loans than banks are. In some cases, you don’t even need collateral!

Micro-loans can be used for all kinds of things: starting a business, buying equipment and supplies, paying off bills (particularly medical bills) so that you can get back on your feet after an illness or injury—whatever it takes to help someone get back on track financially.

 

Get started with Micro-lending

Micro-lending can help you get started on a new business venture even if you have not been in business before and/or have bad credit.

Getting started on a new business venture is not as easy as it used to be. With so many options available, it can be difficult to know which one is right for you. If you are thinking about starting up your own business, micro-lending may be able to help you get off on the right foot.

Micro-lending allows small businesses and entrepreneurs with limited credit and collateral to secure loans that they might not otherwise qualify for at traditional banks or lending institutions.

Micro-loans are generally much smaller in size than most other types of loans, but they can make all the difference when starting up a new business or improving an existing one.

In fact, many economists believe that micro-lending has helped spur economic growth by giving small businesses access to capital they otherwise would not have been able to obtain through traditional means.

Funds received from micro-lenders may be used for almost any purpose including buying inventory, supplies and equipment as well as for operating expenses.

Benefits of Micro-Lending

Micro-lending can be used for almost any purpose. A business that uses micro-lending to expand its inventory, supplies and equipment is able to maintain lower prices. The resulting lower prices make the products even more attractive to consumers who in turn buy more of them.

So you want a new car? Micro-lenders can provide access to capital for buying new cars, trucks or vans. Micro-lenders also provide financing for repairing vehicles damaged by accidents or other mishaps so that owners can drive their cars again safely and legally.

Micro-lending can help you get the funding you need for your business when traditional sources have said no

Micro-lending is an excellent way to get the funding you need for a business or other type of new venture. Traditional sources of capital may not be interested in lending to you, but a micro-lender might welcome the opportunity.

Roadblocks to getting a Micro-Lending

There are many reasons why your small business may have trouble getting funding from traditional lenders.

Perhaps your credit score is low, or maybe you don’t have enough collateral to secure a loan. Maybe the bank doesn’t think that your product will sell well enough to pay back the loan with interest.

Whatever the reason, it’s frustrating when banks reject your application for lack of assets or poor credit history—but micro-lending could be just what you need!

 

Starting up a Micro-Lending business in Nigeria

When you’re ready to get started, here are the first steps:

• Company name reservation
• CAAC 1.1 pre-registration form
• Stamp duty certificate
• Payment of filing and stamp duty fees
• Uploading of requested documents, which includes: CAC1.1, MEMART, Form of Identification for directors and Secretary
• Proficiency certificate
• Evidence of CAC payment
• Submission of the original documents to any official CAC office

 

The Central Bank of Nigeria (CBN) is the sole regulator of micro lending business in Nigeria. As a result, all microfinance institutions in the country are required to adhere to the CBN’s Micro Finance Policy which was last updated in 2017. The policy mandates that all MFIs must have at least N25 million as capital base and are required to register with their respective regulatory bodies before starting operations.

In addition, there are two other laws that govern micro lending business in Nigeria: Federal Capital Territory Financial Inclusion and Accessible Credit Act 2016 as well as National Policy on Microfinance Institutions (NPIMFI). These laws also set out minimum capital requirements for MFIs with branches within each state or federal territory respectively

MFB licence

A Microfinance Bank (MFB) licence is one of the most important documents a micro lending company needs to operate in Nigeria. Without it, you cannot start a business as a micro lender.

• What is a Microfinance Bank Licence?

This document is granted by The Central Bank of Nigeria (CBN) under the CBN Act 2015, and it gives you permission to operate as a micro lender. As part of your application process, you will be asked to provide information about your banking history, including previous loans granted and defaulted on. If these numbers show that you are trustworthy and capable of paying back your clients with their loans plus interest rates on time every single month for years at least—you might just get approved!

 

 

 

• Operating without MFB licence

You are operating a microfinance business without a licence. This is illegal, and you could be imprisoned or fined. You cannot apply for a microfinance business licence with MFB, the Microfinance Banks Association of Nigeria (MBA). Furthermore, you cannot be part of the MBA if your business has not been licensed by MFB; this means that if your company were to be caught operating without a license, it would also be expelled from being part of the association.

Managing micro lending business in Nigeria

The success of any business depends on the sound management of risks and a good governance structure. These are the main areas that you need to focus on when starting or running your micro lending business in Nigeria.

Have a sound business plan: A good business plan outlines all the essential elements of your business, including its objectives, strategies and resources required to achieve them. It also provides an estimate of costs associated with starting up and running your project as well as measuring its profitability (or loss) over time.

Have a management team: You need to have capable people who can lead your team members towards achieving their goals by providing guidance on how best they should proceed with their work every day so as not only grow but also remain competitive in this market which is highly dynamic due to changes in technology among other factors that affect businesses’ performances at different levels such as local/national markets.”

Conclusion

Micro-lending is a great way for those with limited financial means to access the resources they need. It has become a popular form of support in recent years, and is something that you may consider if you are looking for a small loan to tide yourself over until payday or help out with some unexpected expenses.

If this sounds like something that might benefit you, then do some research into finding out what micro-lenders are available near where live so they can get started today!