The Latin American lending industry is historically predatory toward its borrowers, recharging outrageously high rates of interest to pay for expected risk and make large profits. Numerous nations have actually few banking institutions, meaning there clearly was competition that is little drive down expenses with no motivation to provide lower-income customers. Banking institutions also find it difficult to offer smaller loans for people or smaller businesses because these discounts are sensed to be riskier. These clients must then resort to predatory personal loan providers whom charge month-to-month interest of 2-10%.
When you look at the 1990s, microloans starred in Latin America, supposedly to resolve this credit space and reduce poverty. These US$100-500 loans target the rural, casual market to behave as being a stop-gap for low-income families looking for quick money or even to help jumpstart a business.Read More »The task of lending in Latin America