microcredit

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Related to Micro credit: Microfinance

microcredit,

the extension to individuals of small loans to be used for income-generating activities that will improve the borrowers' living standards. The borrowers, most of whom usually are poor women, do not qualify for a conventional bank loan, and the loans, which may be as little as $20 for very poor borrowers in some developing countries, typically are for a short term (a year or less), are not secured by collateral, and require repayment in weekly installments.

Because of the high cost, relative to the loan size, of running a microcredit program, interest rates on microcredit loans are high, sometimes as much as 35%; in the case of microcredit loans by commercial institutions, the rates may be even higher. Peer support groups consisting of other borrowers are often a component of microcredit programs, and help ensure that the borrowers repay the loans. Successful microcredit programs typically also focus on improving the education and health care of their borrowers, and do not allow individuals to borrow more than they can afford to repay.

The concept of microcredit was developed in 1976 by Muhammad YunusYunus, Muhammad,
1940–, Bangladeshi economist and banker, b. Chittagong (then in British India), grad. Vanderbilt Univ., Nashville, Tenn. (Ph.D. 1971). Yunus, who taught economics in the United States after receiving his doctorate, returned to his homeland when it won its
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, a Bangladeshi economist, as a means of alleviating the poverty and improving the lives of the very poorest inhabitants of Bangladesh. The Grameen Bank, formally established in 1983 through Yunus's efforts, expanded microcredit with the help of loans and grants, and is now self-supporting. Microcredit programs and institutions have been created in many other nations in Asia, Africa, and Latin America. Similar programs have been established to aid individuals in developed countries who do not qualify for conventional loans.

Although microcredit programs were originally operated by nonprofit organizations, a number of for-profit companies also focus on microcredit lending. The term microfinance, although often used as a synonym for microcredit, is especially used to describe commercial microlending and also may include other financial services offered on a small scale to the poor, such as bank accounts that do not require minimum balances.

Some critics see microcredit misfocused, because it is too limited to alleviate poverty in general, especially in societies where many causes other than restricted access to credit have resulted in pervasive impoverishment, but it has nonetheless improved the lives of millions of individuals and their families. The development of for-profit microlending, on the other hand, disturbs nonprofit microcredit lenders because the need for profits potentially shifts microcredit lending to those who are less poor while diminishing the resources available and the willingness to lend to the very poorest. However, in India, where for-profit microlending grew rapidly in the first decade of the 21st cent., microfinance companies in some cases lent indiscriminantly to borrowers who lacked the means to repay the loans, leading to a sharp rise in defaults in 2010 and a public backlash against the industry. Backlashes against microcredit programs and institutions (including the Grameen Bank) have also occurred in other nations, sometimes for politically motivated reasons.

References in periodicals archive ?
AGFUND and MSC collaborated in establishing the regional conference of micro credit in the Middle East and North Africa in Amman, Jordan in 2004, which was inaugurated by Prince Talal, and Queen Rania Al-Abdullah, which was the most successful conference that specializes in micro credit at the level of the Arab countries and was attended by more than 800 participants .
Man Sang Group will develop new business in the Mainland China - Micro Credit Business.
The contract regulates the technical aspects, the procedures for coverage and claims payment of the micro credit operations.
Project description: The project is focused at giving opportunities for improving the economic conditions and quality of life of more than 3500 family members of women farmers of the Republic of Uzbekistan by providing them with micro credits and, increasing their educational level and skills in farming.
The data is depicted to clearly show that Micro Credit is viable and can be implemented in developed countries in an effort to get people off of welfare and offer an opportunity to those who are the have- nots.
Beyond Micro Credit draws on the experiences of organisation development and entrepreneurship and challenges the present simplicity of micro-finance analysis.
Mr Gering said: "Unfortunately UK government aid for micro credit is mostly only going to people who are already in business and are not among the worst off.
So that MFIs can become micro credit banks and can take deposits and lend money, they don't have to go to the market.
ISLAMABAD, May 26, 2011 (Balochistan Times ): The Micro Credit Summit Campaign (MSC) in its annual report 2011 ranked Khushhalibank, a premier Pakistani microfinance organization, as one of the biggest microfinance entities of the Asia Pacific region currently served two and a half million relationships and over four hundred thousand active clients.
The Jordan Micro Credit Company (Tamweelcom) organized the first free medical day in its branch in al-Hashemi al-Shamali.
BRAAMFONTEIN, South Africa, March 9 /PRNewswire/ -- On the event of the launch of the National Consumer Credit Act, micro credit providers in East and Southern African countries are to meet in South Africa on March 9-11,2005 to discuss ways to provide responsible credit that builds confidence and assists poor communities to build assets out of credit facilities offered by these institutions.
In all micro credit programmes, measuring impact of the programme has been difficult because it takes about 8-10 year to see the impact of the programme.