Open AccessFEATURES OF LENDING BY COMMERCIAL BANKS AND MICROFINANCIAL ORGANIZATIONS
Author(s) -
Maria Myropolska,
Sofiia Dombrovska
Publication year - 2021
Publication title -
pričornomorsʹkì ekonomìčnì studìï
Language(s) - English
Resource type - Journals
eISSN - 2524-0900
pISSN - 2524-0897
DOI - 10.32843/bses.63-20
Subject(s) - collateral , loan , pledge , microfinance , cross collateralization , non conforming loan , business , financial system , participation loan , population , interest rate , debt , non performing loan , finance , economics , economic growth , demography , sociology , political science , law
The article considers the interaction of microfinance organizations with banks. The features associated with lending by commercial banks and microfinance organizations, which have now gained significant popularity, are indicated. The development of microfinance organizations is associated with certain restrictions for the population with low incomes in providing them with credit resources by commercial banks. In today's economic environment there is an increased demand for borrowed funds, in traditional banks, as financial institutions with regulated lending conditions, the loan is approved when the borrower submits a pledge, so that if the borrower is unable to repay the loan with interest, the pledge provided by the borrower , was withdrawn by the bank and used as a way to repay the loan. But there is still a large part of the population that is unable to provide collateral to advance a bank loan. And because of this we can conclude that banks can not fully meet the demand for debt capital for the impoverished, and therefore as an alternative to banking lending was introduced the concept of microcredit, which allows people to advance loans without any collateral. Unlike traditional loans, where the loan is provided only if the borrower provides something as collateral and the appropriate amount of interest determined by the bank, microcredit does not require any collateral in exchange for the loan, but is provided at much higher interest rates rates than conventional bank loans. The definition of microcredit is a small loan that is usually financed for entrepreneurial projects, impoverished people and groups, especially in poor or developing countries. Microcredit is part of the microfinance industry. Microfinance is a way of providing loans, credits, insurance, access to savings accounts and remittances to small businesses and entrepreneurs in underdeveloped parts of the world. Beneficiaries of microfinance are those who, as a rule, do not have access to traditional financial resources like ordinary people, but compared to ordinary loans, interest rates on microcredit are slightly higher than on ordinary loans.