1. Microlending companies can supply much needed capital to underserved markets and individuals who would not otherwise have access to financing. This can help promote economic development in areas where traditional lenders are unwilling to lend.
2. Since microlenders typically require less paperwork than traditional lenders, the application process can be much faster and easier for borrowers.
3. Microlending companies typically charge lower interest rates than traditional lenders, so borrowers can benefit from more affordable financing options.
4. By providing a mix of short-term and long-term loans, microlenders are able to address a variety of different customer needs.
1. Since microlenders typically require less paperwork, they may not have the same rigorous credit checks and due diligence as traditional lenders, meaning that there is more risk involved with these types of loans.
2. For borrowers, there may be significant delays in getting funds, as microlenders often have smaller loan portfolios and so the processing of applications may take longer.
3. Microlending companies may not be able to offer the same level of customer service and support that traditional lenders can provide.
4. As with all types of lending, there is always a risk that borrowers will default on their payments, which can lead to a loss of capital for the lender.
5. Finally, many microlending companies are not well-regulated by governments and there is a risk that lenders may not follow best practices when it comes to ensuring borrowers are able to repay their loans.