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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 ?
They said the funds provided to PPAF for micro-credit are used for on-lending to Partner Organizations (POs) which provide micro-credit loans to individuals/communities following a demand driven approach.
But there is an important institution that complements Yunus' micro-credit.
Earlier, a Danish documentary maker Tom Heinemann had alleged that Yunus and his associates had diverted nearly 100 million dollars of grant money to another company, Grameen Kalyan, which was not involved in micro-credit operations.
lt;p>AaAaAaAa Micro-credit in Morocco "is in fine fettle and is well developed," the French economist and writer said, noting that microfinance is "an excellent tool of development" and that new technologies constitute "a factor of the financial system's growth".
Muhammad Yunus, an economist, won the Nobel Prize for his work in Bangladesh developing the Grameen Bank, one of the world's best known micro-credit organizations.
A compelling feature is an integrated micro-credit scoring and rating engine based on socio-economic factors.
We already helps more than 9 million people a year to find jobs and we will create a new €500 million micro-credit facility to support entrepreneurs and at a national level we want to see 5 million young Europeans have access to apprenticeships," Barroso said.
Of the estimated 12,000-13,000 people to receive training, 10,000 will be involved in construction and related activities, 1,500-2,000 in income-generating activities and micro-credit eligibility, and 1,500-2,000 in nutrition and child care,'' Iwasaki said.
Beyond Micro Credit: Putting Development Back into Micro-Finance challenges long-held assumptions about micro-credit and urges the development community to reform its approach.
While governor of Guanajuato in the late 1990s, he set up several micro-credit programs that now boast successful results.
The Canadian Youth Business Foundation is a non-profit, private sector initiative, that provides micro-credit financing, mentoring and on-line support.
Indeed, micro-credit programs have in recent years begun to attract the attention of both private and governmental national and international aid agencies and organizations.