microcredit

(redirected from microloan)
Also found in: Dictionary, Financial, Wikipedia.
Related to microloan: microlending, Micro lending, Micro Lender

microcredit,

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
..... Click the link for more information.
, 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 ?
We learned that approximately one in five of our clients desires capital beyond a microloan, so the Community Advantage program achieves an important next step in their growth plans," said Paul Quintero, CEO of Accion East, Inc.
In addition to discussing market conditions, the Filene report also studied borrower demand, and said microloans and credit unions might be well suited for one another.
Obuv Rossii CEO Anton Titov comments: "In addition to our plans to achieve a dynamic expansion of the retail network, we are successfully implementing a customer loyalty program, increasing the number of repeat purchases and requests for installment payments and microloans.
But a smaller slice of the funding pie seems to be more than enough these days, considering that the city hasn't distributed a microloan since 2011, and only four in the last five years.
Since 2005, Kiva has crowdfunded more than $400 million in microloans by connecting a growing global community of 890,000 lenders to 975,000 entrepreneurs from five continents.
Only those traveler who have written reviews in countries served by Kiva will be invited to make a TripAdvisor USD 25 microloan.
Small Business Administration, the average microloan amount is about $13,000.
He added: "The feedback we are receiving from our customers is that they like the simplicity and flexibility of a microloan as well as the fact that it is specifically aimed at helping people with a short-term requirement for money.
Provides loan packaging assistance, land acquisition assistance, zoning and Permitting information, state regulatory process information liaison with Government agencies, microLoan fund, business counseling, business research library, economic development networking and more.
With nearly half a million dollars in grants awarded to microloan agencies in Africa since December 2006, Micro-financing Partners operates under the ambitious vision of eliminating abject poverty, one small business loan at a time.
Some microloan funds for Cuba also could be set up as U.
For example, SBA must submit weekly reports that include funds it obligates to support its loan guarantee and microloan programs, as well as its contracting activities.