Business, Finance & Economics

How the credit crisis affects micro-loans

Alex Counts says that so far microcredit has been largely shielded from the financial crisis: the poor, their businesses were never as overextended as middle class businesses. This was also the case in Indonesia during their financial crisis in 1997. the lenders in microfinance tend to be very cautious so they're less vulnerable to this kind of a crisis. (How about the people who are loaning the money? Are they unable to get loans now?) That is a risk in some markets, India in particular where micro lenders are now largely borrowing from banks as opposed to the philanthropic world. (Are there people in Bangladesh who right now are paying attention to what's happening in the U.S.?) Yes, I'm sure it's on their minds. However I think they're watching it more with a feeling of being relieved because Gramin Bank has financed its loans almost entirely through the deposits of people who get loans from this. So they're very insulated from this crisis.

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