What are financial microcredits?

Written by Davies on / Reading time: 3 minutes.

What are financial microcredits?

We want to tell you what financial microcredits are and how they affect loan financing for enterprises. Have you heard of their relationship with cryptocurrencies? Why are blockchain projects focused on a microcredit? Davies wants to share with you all this and much more. We don’t want you have any doubt, so we will begin to clarify its definition. Are you coming with us?

Financial microcredits. What are they?

It is a loan of a small amount of money with a high interest rate and a very short time of return. The people who do it tend to be low-income borrowers, mostly micro-enterprises in emerging economies that, normally, "would not be eligible for bank loans because they lack guarantees".

Thanks to microcredits, economic sectors have managed to boost, because it has injected a dose of development projects that would have been impossible without this type of financing. Therefore, we are talking about a completely different instrument, that gives equality, independence and orientation of enterprises towards their projects.

Advantages that companies can found in financial microcredits

Currently, banks are monopolizing the market indirectly. Why? It seems that although they do not have shares of many companies, some of them owe money to the Bank since they have had to seek credit lines, loans to expand, etc. As a result, a control of the market occurs without anyone noticing. However, with the decentralization introduced by cryptocurrencies it could be a solution to this handicap, providing greater freedom and control over their own money to the companies.

Why not let everyone lend money to another by applying the interest and the term of return you want? Did you know that this is now possible thanks to cryptocurrencies?

Why betting on peer-to-peer microloans?

Imagine that a family member is in Chile and you are in Europe. You need to lend he/she money. What would you do in this case? This is not a problem with cryptocurrencies, but a quick and effective action at a cost very low. The money can reach your recipient's instantly and securely. A microcredit is able to provide very small amounts of capital to give a boost to projects of companies and conform to the needs of each company.

Then we will tell you what are the reasons why many businesses and individuals are already betting on these services:

  • They can save you from many troubles.
  • It is a way to quickly and easily get money to drive growth.
  • It is a credit opportunity to increase income or personal and business goals.
  • They are a suitable breeding ground for the cryptocurrencies, as they allow to be functional in the long term and provide a great value. How do they do it? For example: with decentralized microcredits offers.
  • They are an ideal method for funding projects.

Cryptocurrencies are becoming a unique alternative for the society from different points of view. "In Spain, dozens of entrepreneurs have set up their projects with this technology or are preparing to do so. They are 26 companies, according to the ICO map elaborated by Jaime Fernández Cerezo, Fintech Advisor in Finnovating. Ranging from educational platforms where teachers paid their wages in cryptocurrencies until financial microcredits for sustainable agriculture in Latin America", as Cinco Días reports.

The blockchain technology can help the most underprivileged

One of the overall benefits of virtual currencies for the society is their chance to reduce financial poverty and make possible the access to resources by the most disadvantaged societies. It is still early to talk about figures or an end to the economic gap that plagues the world, but what is clear is that it opens the possibility of reducing the number of more than 2,700 million people who do not have access to capital worldwide.