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Technology & Innovation

Improving on Microloans

The life of a microcredit loan is often very short—lengthening the repayment window would allow borrowers the opportunity to create bigger gains, says Forbes' Eva Pereira.

“Compared to loans in developed countries, microloans have far shorter repayment cycles, oftentimes as short as a week. In Field’s 2009 study she analyzed the effects of allowing borrowers a two month grace period before repayments began. The study aimed to find out how borrowers would behave without the looming burden of an immediate debt repayment. As it turns out, borrowers were more likely to start new businesses or invest in existing ones given the two month grace period. Exactly as they had suspected, with the immediate burden of liquidity gone, borrowers put their money into projects with higher profit expectations.”


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