Business Plan



The microcredit loan cycles are usually shorter than traditional commercial loans with terms from typically six months to a year with payments plus interest, payed weekly. Shorter loan cycles and weekly payments help the borrowers stay current and not become surprised by large payments. Clearly the transaction-intense nature of weekly payment collections, often in rural areas, is more expensive than running a bank branch that provides large loans to economically secure borrowers in a metropolitan area. As a result, MFIs must charge interest rates that might sound high....
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swastik micro LOAN

The microcredit loan cycles are usually shorter than traditional commercial loans with terms from typically six months to a year with payments plus interest, payed weekly. Shorter loan cycles and weekly payments help the borrowers stay current and not become surprised by large payments. Clearly the transaction-intense nature of weekly payment collections, often in rural areas, is more expensive than running a bank branch that provides large loans to economically secure borrowers in a metropolitan area. As a result, MFIs must charge interest rates that might sound high. In order to be able to lend out money, the microfinance institutions must in addition borrow from the traditional finance sector with commercial perspective. There´s always about 1-2% loss on loans due to people not paying back. To be able to expand business the MFIs must also make some profit, at least 1-2%. All in all it´s easier to understand why the MFIs charge their customer interest rates which in first sight might appear high. With a growing market, better economics of scale and increasing efficiency the cost will reduce and lower interest rates are able.