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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 Utopia Foundation has supported two organizations, Fonkoze in Haiti and the Hermanus Rainbow Trust in South Africa, which we feel stand out as examples of responsible microlending.
Over the past seven years, Kiva has helped to mainstream microlending and pioneered the field of crowdfunding.
Five years later, it appears that the Cuban government--through Resolution 99 of the Banco Central de Cuba (BCC), and Decree Law 289--will soon launch its own microlending program to small businesses.
CDCI program has enabled low-income CU to offer microlending.
They speak with pride of the difference they are making in the world; they refer with apparent expertise to the tenets of microlending that they have gleaned from readings, lectures and guest speakers; they quote Muhammad Yunus liberally and with an almost reverent tone; and they lament that they have only one semester to do the work that they think of as their own: to help lift entire families out of poverty around the world.
The growth of the microfinance and microlending has spawned considerable research interest in this industry and its international growth.
Until now, Mexico has had only weak and poorly funded projects," said Yunus, who has gained wide recognition for creating a model of microlending that is widely used globally to address poverty.
Dana Dakin had "adopted" a village in Ghana-Pokuase, close to Accra, where she started a microlending program to small groups of women.
Volumes of microlending of population in Kyrgyzstan increased 18% in first half of 2009 in comparison with analogous period of 2008 from 4.
With unemployment increasing and Americans everywhere struggling to respond to the recession, the bill aims to provide $3 million in microloan subsidies to support $25 million worth of microlending.
The money allocated to microlending was increased by $6 million.
org will help us increase our microlending activities here in the West Bank.