Assess a microloan application by separating repayment capacity from collateral comfort.
A strong microloan decision is not a hunt for one impressive fact; it is a balanced read of repayment reality. Capacity first Capacity is the cash-flow test. In microfinance, capacity is rarely sitting in a clean income statement, so you reconstruct it from sales rhythm, gross margin, household obligations, debt already owed, and the timing of cash-in versus cash-out. The danger is approving a loan that looks affordable on average but fails on the actual due date. Collateral second Collateral reduces loss after failure; it does not create repayment before failure. A borrower who must sell a productive asset to…
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