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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 ?
I'm ordering to increase microlending of Kazakhstanis this year by 20 billion tenge compared to last year.
New Delhi [India], Feb 21 ( ANI ): Microlending platform Happy Loans surpassed the disbursal of 7200 loans, totally worth around Rs.
The sprawling online microlending business has fuelled a 1.
Ben Casselman takes a more critical look at microloans for FiveThirtyEight, writing, "A series of six independently conducted randomized controlled trials found that a variety of microlending programs had little to no effect on participants' income or financial well-being .
20,000- crore microlending scheme could be a bank in 12 months
contributing in excess of USD 2bn in statewide corporate lending, and engineering statewide microlending opportunities via the Pure Michigan Micro Lending Initiative in Detroit and further pending in additional Michigan communities.
Microlending will help spur Islamic bond sales because banks will need to raise funds for such initiatives, CIMB's Badlisyah said.
Increasingly, there are also mixed models in which crowdfunding methods are applied to microlending.
The development of microlending as a subsector of the Namibian financial sector is to be expected as a natural step in the evolution of local finance and the DBN wants to play its pivotal role in that regard.
Q I've been hearing a lot about microlending lately.
Walker, Note, The Future of Microlending in the United States: A Shift from Charity to Profits?
As a pioneering MFI that has always focused on maximizing social impact, one innovative product which KREDIT has just introduced is the education loan, supported by Vittana (a Seattle- based NGO specialized in providing education in third world countries) and Kiva (a peer-to-peer microlending website).