M9 Obtaining loans from money lenders

Micro EnterpriseDebtFinancial Management
  • When poor people without savings need money quickly, for events such as illness, family funerals or weddings, they usually turn to a local money lender for a loan.
  • Money lenders are usually well known, easy to approach and often do not ask for any guarantees before giving a loan. However, the rates of interest they charge are usually very high indeed. Repaying a loan may push a family further into poverty and debt.

Discussion 
  • Are there other advantages of using local money lenders? Are there social pressures which make it difficult for people to obtain money from elsewhere?
  • What are the disadvantages of using them? What alternatives do people have?
  • Discuss people’s experiences with money lenders. Are there examples of people who have become trapped by debt which continues to grow? They may be forced to keep borrowing more to pay back previous loans from money lenders.