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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 ?
The French Development Agency (FDA) signed a deal with Shelter Afrique, generating a credit line for banks to borrow from and lend to their customers, specially targeting micro-lenders who will lend long-term loans to their clients to buy houses.
The event is an opportunity for business owners and others to talk to community lenders, micro-lenders, business advisers and/or technical assistance organizations to briefly discuss specific needs.
We have been asked to review the operations of Grameen Bank and also how its lending rate compares to other micro-lenders," the BBC quoted Professor Ahmed, as saying.
Almost all of our borrowers are people who could not qualify for bank loans," says Amy McKenna Luz, former president of the Association for Enterprise Opportunity, a trade group for micro-lenders, based in Arlington, Virginia.
Since the creation of this facility, DBN has developed a track record of successfully providing micro-finance to developmentally beneficial micro-lenders, notably to support teacher development.
Other lenders like micro-lenders, he said can charge up to 35 per cent interest rate on loans.
Online System Helps Match Low- to Moderate-Income Entrepreneurs with Specialized Micro-Lenders Ready To Fund New Jersey Ventures
The amendment, which among other things, requires micro-lenders to be registered with the Ministry of Finance, is to be tabled in the National Assembly soon.
Citi also remains dedicated to providing access to capital for those organizations supporting qualified, mission-based Community Development Financial Institutions, Community Development Corporations, micro-lenders and other non-profits that then on-lend to small business owners, via Citibank Community Capital and the $200 million Communities at Work program.
Namibia Financial Institutions Supervisory Authority (Namfisa) is threatening micro-lenders who do not comply with plans to refund overcharged customers with cancellation as registered micro lenders.