Microfinance for some people is shrouded in mystery and myths because we simply do not understand some of the terms and jargon used by providers of this service. And because we are not well informed, we tend to shun the idea of exploring this very helpful service, simply out of ignorance.

Let’s simplify the microfinance “language”, knowledge is wealth indeed!

Borrower is the individual or business looking to take out a loan from a financial service provider.

Lender is a financial institution that avails funds to a person or business with the expectation that the funds will be repaid with interest fees over an agreed repayment period.

Short – term Loan is a type of loan that is obtained to support a temporary personal or business capital need without collateral.

Interest Rate is the amount a lender charges a borrower and is a percentage of the principal amount loaned. The interest rate on a loan is typically noted on an annual basis known as the annual percentage rate (APR).

Principal Amount the amount money initially borrowed from the lender, and as the loan is repaid, it can also refer to the amount of money still owed.

Repayment Period is the time frame you have, depending on your repayment plan to pay back your loan.

CAUTION: Borrowing more than you can afford to repay can lead to severe financial difficulties.

*Credit Investopedia