Difference Between Micro-Credit & Micro-Housing Loans
MICRO-CREDIT – Microcredit is one aspect of microfinance which is designed to provide microloans (very small loans) to poor clients, the proceeds of which are meant to be used as capital for self-employment projects that generates income and alleviates poverty.
MICRO-HOUSING LOAN – This housing loan product targets lower income clients who may use the loan for housing improvement or completion of stalled housing projects. MFIs are one of the providers of micro-housing loans.
| MICRO-CREDIT | MICRO-HOUSING LOAN | |
| Target users | Micro-entrepreneurs and low-income households | Low-income households that do not enjoy access to traditional housing finance. |
| Utilization of funds | Income generation, and enterprise development, but also for community use (health/education) etc. | Building or renovating houses. |
| Impact | Impacts borrower’s income | Impacts borrower’s assets base & may impact income |
| Loan amount | Offers very small loan amounts | Offers relatively larger incremental loans amounts |
| Fungibility | May or may not be “fungible” | Relatively harder to be “fungible” since housing loans are disbursed in a staggered/incremental manner |
| Individual/Group loans | Can be individual or group loans | Usually individual loans |
| Collateral | Unsecured loan | Can be secured |
| Repayment capacity of borrowers | Repayment capacity based on ability to use the loan to generate future income | Repayment capacity based on borrower’s current income |
| Non- financial assistance | Usually don’t require non-financial assistance | Usually need non-financial assistance like Evaluation of technical feasibility of the proposed improvement, Preparing cost estimates, Providing technical assistance as needed in the improvement, design and construction, and Providing construction oversight. |
