Which of the following statements does not describe microcredit loans?
What Is Microcredit?
Microcredit is a form of microfinance which involves giving loans in relatively small proportion to an individual to assist or help them to grow their small business. Borrowers of loans from microcredit unions are normally low-income earners and they usually resides in less developed countries.
The statements are as follows;
a. Microcredit loans are common in poor and developing countries.
b. The United Nations (UN) estimates that women constitute 76% of microcredit customers.
c. Microcredit loans do not attract interest.
d. Non-governmental organizations around the world currently use microcredit loans.
Looking at the above possible options, the right answer to the question “Which of the following statements does not describe microcredit loans” is option “c”, that is, “Microcredit loans are interest-free”.
Reasons Why The Answer Is Option C.
The option “c” was chosen because it is an undeniable fact that;
• Microcredit loans are the most common in developing countries. This is because most people in these countries are unemployed and have low income.
• The UN estimates that women make up 76% of microcredit customers. It is true that women constitute the larger part of the world’s population.
• NGOs around the world currently use microcredit loans. These non-governmental organizations are normally non-profit making associations, so they sort to making use of microcredit loans.
• Microcredit loans are interest-free/ do not attract interest. This statement is false hence becomes the correct answer. This is because all loans obtained from microcredit unions attract a percentage of interest based on the duration of the loan period. These interest percentages may vary from one microcredit union to the other.
The Micro Credit Association of Ghana incorporated on May 2, 2010 as a head organization for “Money Lending organizations and individuals under the Companies Code 1963 (Act 179)” as an association limited by guarantee has the following objectives:
- To bring members together in a single organization. To develop professional relationships within members and other stakeholders.
- To join in partnership with other top bodies to build a unified step towards lobbying from the government, development partners and other regulatory bodies to influence some of the microfinance policies.
- To produce operational standards of practice for members and stakeholders.
- To ensure that members go by the code of conduct and practices by the association. To promote welfare of members and other stakeholders.
- To authorize their clients to maintain sustainability in their business and also improve their clients living conditions.