By: Charlotte Cox, BA International Relations, Minor in Spanish 2024
The world we live in has constantly embedded the idea that bigger is better. From an early age, we always wanted the biggest present and cried to have the most ice cream on our cone. As we grow older this desire to have more does not disappear but evolves with us, and we begin to want the biggest house or to make the most money. However, this concept of “bigger is better” is not necessarily the case in the world of loaning to entrepreneurs in developing countries. Spartan Global promotes microfinancing loans instead of the use of large loans from banks or charities. Before getting into the benefits of microfinance loans we must start by understanding the process of offering microfinance loans. Microfinance loans are exactly what they sound like--giving small (micro, between $1,000-$5,000) loans to entrepreneurs in the Global South who not only have a need for the money, but also a plan for what the money will be used for to grow their business. By only loaning a small amount of money, interest free, it gives that individual the opportunity to become financially independent because they will hopefully not only earn the money back to repay their loan, but also save additional profits by implementing their business plan. Microfinancing loans to small business owners is beneficial because it promotes smart money practices, incentivizes entrepreneurs to create a business, and is sustainable practice. Microfinance loans help the very people that big banks and corporations overlook and provides them a chance to create social and economic empowerment for their family and community.
When organizations and non-profits, such as Spartan Global, loan micro loans, we are not loaning to big corporations, who already make millions. Instead, we are investing in the very foundation of every economy--small business owners. Most of the business owners that receive micro loans are women, who receive less support and are made to be more invisible in the economy than their male counterparts. By offering loans to women, it gives a population that is often overlooked a chance empower themselves, their family, and community. Microfinancing promotes inclusivity by offering loans to a diverse population that often is not given the same number of opportunities. Microfinancing also empowers the local economy of a community by providing entrepreneurs with a loan which can create more jobs in their community. Microfinance also assists in creating a better business for these small entrepreneurs because it allows some of the burden of other expenses related to their business to be lifted, such as costs for technology. Since microfinance loans do not exceed $5,000 and they are facilitated through trustworthy field partners embedded in the community, there is a high rate of repayment. When a payment for a micro loan is complete, more times than not that same money is reinvested back into that same community.
Microfinancing may seem like a simple idea. However, if you dive deeper into the process of microfinance, you will begin to see the lasting effects that microfinance has on communities. It promotes positive investments in local economies and allows small entrepreneurs to thrive and build up their business, but also teaches them loan recipients how to finance and save their money. Through microfinance, personal relationships can be created through a lender and their loan recipients. Spartan Global prides itself on the relationships it has built and maintained with is field partner and loan recipients in Guatemala. Through these relationships, Spartan Global observes the direct impacts microfinance can pose to aspiring entrepreneurs that are traditionally left behind by the commercial banking industry.