Payday Lending in The USA, Europe and Africa
The phenomenon of payday lending in its modern form appeared in the 18th century due to the conservatism of large commercial banks operating in Europe and the United States. For a long time, they preferred to work with clients that are similar to them. As a result of the unmet demand for small loans in the 19th century, a huge number of small credit cooperatives arose.
Therefore, when by the middle of the XX century, European banks decided to turn their face to wider segments of the population, the microcredit lending market turned out to be oversaturated that’s why many people start searching reliable lending options. We offer you an informative resource containing the main information about payday loans Macon GA – georgia-ssbci.org. All the information is given free of charge. You won’t lose anything when grappling with the offered data.
True, the new democratic banking programs were focused more on small businesses and the middle class. The poorer strata of the population were left out of both banking offers and the services of credit cooperatives.
The concept of microcrediting as a tool for financial assistance to the poor was developed in the 1970s by Mohammed Yunus, later – Nobel laureate. He tested it in his native Bangladesh, a former British colony. The essence of the mechanism was to combine the functions of a bank and a microfinance cooperative. Clients took out payday loans for various purposes. The terms for issuing a loan were very simple, and the return of money was guaranteed by “mutual guarantee” – informal associations of borrowers who guaranteed repayment of loans for each other.
This approach proved its effectiveness even closer to the 1990s. Microfinance organizations (MFIs) began to appear not only in developing countries in Asia and Africa, but also in wealthy European countries and the United States. True, in recent cases, the goal of the microfinance institution was not so much to help the poor as to implement social programs and support new types of business. Startups there can get funding from scratch, with only a formulated idea.
In America, MFIs are essentially intermediaries between the Small Business Administration, created in 1953 to lobby for its interests at the state level, and entrepreneurs. Each such intermediary organization can have a loan portfolio of no more than $ 3.5 million. The average loan amount is $10,500, and the maximum is $35,000. The interest rate depends on the loan size (the larger the payday loan, the lower the interest).
In Western Europe, payday lending is actively used to support people without access to banking services, including migrants, enabling them to integrate into society as painlessly as possible. France is especially active in this direction. It has about 90,000 clients using microfinance programs, with a total loan portfolio of 150 million euros. Other EU countries are also moving in this direction. There are enough opportunities for market development in Europe: 18% of the EU population cannot use banking services.
In Africa, the situation is even more contrasting. About half of Africans cannot take out loans from banks, while existing MFIs still cover less than 10% of the population. The demand, which, according to the Ministry of Finance, is about 320 million dollar, in 2011 was satisfied by only 32 million dollar. This illustrates the great potential of the market, as well as the rate of its growth: the loan portfolio of MFIs in 2011 grew by almost 34%.
At the same time, most of the state programs are aimed at MFIs, which were created as a tool to support small businesses that do not always have the opportunity to get a loan from banks. Private consumer small loans are also in demand and are gaining popularity, but such companies have practically no government support, which makes them rather an appendage of MFIs involved in small business lending.
Thus, the main task of MFIs in African countries is not only poverty eradication, as in developing countries, but also not the implementation of social programs, as in Western Europe. For now, the formation of a stable middle class is important for us, therefore, short term lending options should be used to finance small businesses and start-ups.