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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 ?
Micro-loans are available from Finance Wales from the PS6m Wales Micro-business Loan Fund as well as the Europeanbacked PS150m Wales Jeremie Fund.
With the program's technical assistance and a micro-loan, he was able to apply his knowledge and skills to start Impress Digital, now providing the South Omaha business community with posters, signs and business cards.
Although unsecured lending is allowed in most jurisdictions, micro-loans fall under general unsecured lending rules demanding higher provisions.
From construction startups to a children consignment shop, Coastal Community views its participation in the micro-loan program as a part of the credit union's focus on honest, community and trust-all values she's found that young adults cherish.
We would love to see every community have a micro-loan fund.
Most theoretical work has analyzed the topics of savings and insurance, gender issues, the place of subsidies (Morduch 1999), impact measurement, and management incentives; little has been done with regards to the interaction between different members of the supply chain, and the effect that micro-loans could have on them (Armendariz 2010).
It addresses a financing gap which commercial banks do not handle and by subsidising micro-businesses and individuals with 50pc of the finance cost from Tamkeen's portfolio, we believe we are making it even easier for these small businesses and entrepreneurs to use the micro-loans facility.
It addresses a financing gap which commercial banks do not handle and by subsidising micro-businesses and individuals with 50 per cent of the finance cost from Tamkeen's portfolio, we believe we are making it even easier for these small businesses and entrepreneurs to use the micro-loans facility.
O'Brien said he will shift responsibility for administering billing and collections from the city grants program to the city treasurer, Mariann Castelli Hier, and will subject micro-loans to the same collection actions imposed on businesses and individuals that owe money to the city.
CHENNAI, India, January 18 /PRNewswire/ -- IFMR Capital recently concluded a multi-originator securitisation of micro-loans originated by four microfinance institutions in India.
As part of this concept, Zureikat organises trips to Ghor Al Mazra'a, close to the southern region of Karak, for Amman's inhabitants generating income, which is channeled into micro-loans in the village, and also bringing the problems of the area to the visitors' attention, pushing them to come up with solutions.
Second: ACAP had no apparent history or experience working in a developing country or in making micro-loans.