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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 new microcredit program, modeled on a similar program Fox implemented while governor of Guanajuato state, will emphasize supporting the credit needs of 50,000 independent businesses known as "changarros," or companies that have 15 or fewer employees.
Princess Maria Teresa will speak about her work as an UNESCO (United Nations Economic, Social and Cultural Organization) Goodwill Ambassador and advocate for microcredit programs for women in developing countries.
This paper examines the connections between microcredit lending to female entrepreneurs and women's empowerment in the Middle East.
The report's release precedes the Global Microcredit Summit 2011 to be held November 14-17 in Valladolid, Spain, which will be inaugurated by Her Majesty Queen Sofia and Nobel Peace Prize laureate and Grameen Bank founder, Muhammad Yunus.
Microcredit programs provide an opportunity to build sustainable local institutions.
The featured bloggers will be Alex Counts, CEO of Grameen Foundation; Susan Davis, Chair of Grameen Foundation's board of directors; and Sam Daley-Harris, director of the Microcredit Summit Campaign and president and founder of RESULTS.
This report is good news, coming out seven months after a similar survey showed significant progress in Bangladesh," said Sam Daley-Harris, Director of the Microcredit Summit Campaign.
The progress report will show substantial increases in reaching the campaign's goal of providing microcredit to 100 million of the world's poorest families, those earning less than US$1 per day.
The Spanish government is pleased to be hosting the Global Microcredit Summit in Valladolid, Spain in November of this year, providing an opportunity for all 2,000 delegates to share their innovations, forge solutions to the challenges, and deepen their commitment to this very critical work.
Ambassador-at-Large for Global Women's Issues Melanne Verveer, and Spanish Secretary of State for International Cooperation Soraya Rodriguez Ramos are slated to join microfinance expert Larry Reed and Microcredit Summit Campaign Director Sam Daley-Harris to launch the State of the Microcredit Summit Campaign Report 2011.
WASHINGTON, January 26, 2011 /PRNewswire/ -- According to a report released by the Microcredit Summit Campaign, a program of the US-based advocacy group RESULTS Educational Fund, nearly 2 million Bangladeshi households involved in microfinance - including nearly 10 million family members, on net - rose above the $1.
26, 2011 /PRNewswire-USNewswire/ -- According to a report released by the Microcredit Summit Campaign, a program of the US-based advocacy group RESULTS Educational Fund, nearly 2 million Bangladeshi households involved in microfinance - including nearly 10 million family members, on net - rose above the $1.