Honour loans: a comprehensive mechanism to foster development by supporting MSMEs – ICReport in the series on Innovative Finances
Year: 2021
Content-Type: Report
Description: The honour loans mechanism is a multidimensional one combining financing free of interest or requirement for securities or guarantees, with support to entrepreneurs. It has several benefits for entrepreneurs: Firstly, it finances their development, serving as seed funds and strengthening their project’s equity. It can therefore create financial leverage with microcredit or banking loans. Secondly, it can help structure businesses because entrepreneurs must go through a selection process and can then benefit from post-financing technical assistance. An honour loan is also a form of recognition from local and knowledgeable professionals that builds trust in the project. Thirdly, it enhances networking inside their ecosystems and sectors, accelerating commercial access to the market. Honour loans are flexible in terms of amount, maturity, and beneficiaries. They are a complement to the local financial ecosystem and thus contribute to filling the finance gap. They can be integrated into national long-term public policies to support MSMEs and adapted to regional programmes.
Pages: 13 pages
Author: Neuschwander, Claire; Hemdane, Thameur
Categories: Development, Finance, Microfinance, Publications, Risk, SMEs
Tags: Development, Finance, Microfinance, Risk Management, SMEs