A credit crunch is a period when lenders are unwilling to provide loans to borrowers. Generally a lender will extend credit to a borrower under the assumption they will be paid back with interest. But when the economy is bad, lenders become hesitant to make loans for fear of losing their money.
Posts Tagged ‘loan’
A Credit Crunch is…
Wednesday, July 27th, 2011An Intermediary is…
Monday, May 16th, 2011An intermediary is someone who connects people who want to borrow money with people who are willing to lend money. It’s sort of like being a financial matchmaker – your job is to figure out who goes together best.
Becoming A For-profit Organization Is No Cup Of Tea
Friday, August 13th, 2010Transforming a nonprofit into a for-profit company is a tricky and lengthy process that many organizations are willing to undertake.
- The majority of micro loans dispensed around the world come from for-profit microfinance institutions. However, it is rarely known that many of these organizations began as nonprofit NGO’s.
- Transforming a nonprofit into a for-profit organization is a long process and involves attracting investors, obtaining regulatory approval and getting a financial institution license.
- Many organizations struggle to achieve for-profit status while maintaining their social mission – it is difficult to keep the founder, investors and stakeholders equally satisfied.
Facts & Figures
- SKS Microfinance was funded by three rounds of venture capital and grew from nonprofit to have 4.7 billion borrowers in 2009.
- SKS just raised another $358 million in an IPO.
Best Quote
Grameen Bank reaches 7 million clients and that’s amazing. On the other hand, it took Professor Yunus [Grameen Bank's founder] 35 years to do that… Can you imagine how many generations it will take to reach 150 million poor households in India if we took that approach? We have to scale more rapidly, and only commercial capital will meet our huge funding requirements. – Vikram Akula, Founder, SKS.
Foreign-Currency Debt Hits Hard In Central Europe
Thursday, August 5th, 2010In Europe’s tight quarters, borrowing from your neighbor across the border could lead you down a bumpy road.
- Central European households and small businesses are struggling under the weight of foreign-currency debts.
- The fluctuation in interest rates and currency values associated with foreign-currency lending has put many into debt, resulting in stalled economies as people try to pay off loans.
- Governments are scrambling to implement preventative regulations, including legislation to ban foreign-currency mortgage loans and a government buyout fund that would allow borrowers to convert their foreign loans to their native currency.
Facts & Figures
- In Hungary, nearly 70% of the country’s total household debt was borrowed in foreign currency.
- In the Baltic states 70-90% of household borrowing is in foreign currency.
Best Quote
“Hungary is close to its non-performing loan peak.” – Sandor Csanyi, Chief Executive, OTP
Putting A Price On Immigration
Thursday, July 1st, 2010Economists consider if the best way to control entry into a country is a fee…
- Economist Gary Becker advocates an economic solution for the global immigration problem. He proposes attaching a price to immigration, either by selling the right to migrate or auctioning immigrant visas.
- Becker argues that only the most determined or resourceful migrants would be successful, greatly simplifying the process and allowing governments more immigration control. In addition, the receiving country would benefit financially, potentially helping to reduce budget deficits.
- For those who were committed to immigrating, but unable to pay the fee, Becker advises a loaning system in which migrants could borrow from the government and pay them back over time.
Facts & Figures
- Charging 50,000 dollars for the right to immigrate into America would yield the country $50 billion if it let in 1 million immigrants a year.
Foreclosed Homes: A Good Deal For Buyers?
Wednesday, June 23rd, 2010The number of foreclosures on private homes continues to increase, and it shows no indication of stopping in 2010.
- Between 3 and 3.5 million houses in the U.S. are expected to go into foreclosure in 2010 (up from 2.8 million in 2009).
- Foreclosed homes are sold “as is,” so there are many potential complications and hidden costs.
- It’s typical for bank-owned homes to have electricity, gas, and water completely turned off, emphasizing the importance of buyer inspections.
Facts and Figures
- There have been more than 300,000 homes per month for 15 consecutive months that received foreclosure notices.
- An estimated 45% of adults may consider purchasing a foreclosure.
- Some banks are offering financial incentives to those buying foreclosures.
Best Quote
“We’ve plateaued at an unprecedented level of foreclosure activity.” – Rick Sharga, Senior Vice President of RealtyTrac
A Lender is…
Tuesday, October 27th, 2009A lender is any person or business that makes loans. A lender gives a borrower money because the lender expects to be paid back not only the initial amount he or she lent – the principal – but also interest.
Collateral is…
Friday, July 17th, 2009Collateral is something of value (e.g. your house, your credit card, your firstborn) that you give to a lender until you’ve repaid your debt. If you don’t repay your debt, the lender gets to keep whatever you’ve put up as collateral. For instance, if you loan your friend $10, you can keep his sunglasses as collateral until he gives you the money back.
A Loan is…
Wednesday, June 17th, 2009A loan is an agreement between two people where you lend money or property to someone with the understanding that it will be paid back at a later date (usually with interest). People generally take out loans so they can afford large purchases – such as a house or car – or to start a business. On the other hand, people make loans as a way to earn interest on their capital (or extra funds on hand).