In the financial world, there are a variety of different forms of credit, and for most types of credit people are also aware of what kind of credit this is. But some forms of lending have some ignorance. Sometimes credit terms are interpreted or defined completely wrong. One of these forms of credit is called microcredit. Many people and unfortunately also alleged “trade magazines” equate the microcredit as well as here by Jim offered mini loan. But it is not right and therefore a reason to explain the microcredit as such in a correct form.
The microcredit is primarily a commercial loan
The most fundamental difference between microcredit and mini-credit lies in the target group for which these loans are intended. This is exactly how the micro-loan in finance is defined:
“Microcredits are microcredits ranging from one euro to a few thousand euros, which are mainly given to small businesses and entrepreneurs, mainly in developing countries.”
As a rule, microcredit thus serves to build up or expand a small business in a developing or emerging country such as Bangladesh, as well as in other countries which have the stated status. As a rule, microcredits are provided by financial institutions specializing in this type of loan (sometimes governed by the state) and not offered by traditional banks. The mini-loan, on the other hand, is almost invariably given to private individuals and is not tied to a purpose. In addition, there are only private financial institutions behind the individual mini-credit offers and no state institutions – with the exception of bodies controlling financial transactions such as BaFin.
The similarities between microcredit and mini-credit
What is common to the two types of credit ” microcredit ” as well as ” mini- credit” is the fact that the loan amounts granted are rather small and small amounts. As such, for example, banks in Germany define loan amounts of less than € 1,000 in the private customer sector and less than € 10,000 in the commercial sector as a mini loan (private borrower) or micro loan (commercial). In addition, for both types of credit, the respective providers stipulate that these loans are time-limited from the outset. This means that they must be returned to the lender on a date specified in the loan agreement including the interest accrued.