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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 final match would be played between HBL Faisalabad and First Micro Finance Bank on November 29 (Sunday) at Multan Cricket Stadium.
Hassabo has directed the Bank of Sudan to increase the capital of the Saving Bank to assume its role in boosting the micro finance.
Micro finance programmes have the potential to transform power relations and empower the poor-both men and women.
After a lively debate, Dame Helen was left with the very clear impression that the North East is leading the way in micro finance initiatives and by hosting one of the key national micro finance organisations in the region within a fortnight of the CBI consultation, this can only serve to reinforce this message.
I think a part of the problem has also risen by the hype that has governed many; I would not say many, some of these micro finance institutions .
Keywords: Poverty Alleviation, Micro Finance Access and Impact, Economically active rural poor, Regular Repayment Schedule.
Chandula Abeywickrema Chairman, Banking With The Poor Network and a top HNB executive, said the HNB is the only commercial bank in the country to develop a sustainable micro finance strategy.
In the development paradigm, micro finance has become one of the promising ways to use scarce development funds to achieve the objective of poverty alleviation and to cater the so far neglected target groups.
The products have been rebranded and are now launched as Agilis Universal Microfinance (UMF) and will be offered as both a software platform and an outsourced service to Micro Finance Institutions (MFIs) in emerging markets.
Summary: Morocco is the largest market for micro finance in the Mediterranean region, with nearly half of clients, reported the Facility for Euro-Mediterranean Investment and Partnership (FEMIP), which is under the European Investment Bank (EIB).
One of the signs is the country's fertile micro finance sector.