DOES MICRO CREDIT CREATE SOCIAL AND ECONOMIC DEVELOPMENT

Abstract

New businesses frequently face the lack of capital funding at the early stage of their entrepreneurship. This regards to the low level of
credibility by the bank sector as they are constantly seen as unable to guarantee the repayment of a business loan. Micro entrepreneurs
can’t meet the banks requirements such as financial reporting and recorded data. The cost of processing micro loans and the risks
associated with lending to micro businesses make financial institutions hesitant to develop services for micro entrepreneurs. In order to
start up a business a number of entrepreneurs lend from friends and family. Even this is an adequate way for sustainable businesses,
generally a large amount of funding is needed rather than personal saved earnings. This article focuses on different aspects of micro
financial sector in Albania. Facts and figures are used to support how and at what extend entrepreneurial activities are being affected by
the micro lending practices. We also intend to analyze how micro credit system can be beneficial to this group of small entrepreneurs. As
the paper is divided into two main parts, the first part presents data of the micro lending process in Albania, its progress and challenges,
its contribution in business skills development. The second part deals with new appropriate practices to be served to small entrepreneurs
by micro lending institution in Albania in a perspective view.
Keywords; Micro crediting, entrepreneurship, job creation, economic development.