microcredit


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Related to microcredit: Grameen Bank

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
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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 ?
'Now we are discussing with the Federal Territory Foundation to provide this microcredit scheme.
Microcredit, on the other hand, is one of the products of microfinance which is related to small loans.
The largest share in the assets of the OFI sector is taken by insurance companies - the assets of KM 1.92 billion (the share of 46.2 % of this sector), followed by microcredit organizations with the assets of KM 951.1 million (22.9 %), investments funds with the assets of KM 894.6 million (21.5 %), leasing companies with the assets of KM 369.2 million (8.9 %), and the remaining KM 19.1 million (0.5 %) is related to brokerage companies and stock exchanges.
The United Nations Commission in its 62nd session in March in New York was first to commend the Federal government's initiative for pushing the envelope of microcredit innovation and digital loan operation to massive scale.
Unjustified salary payments of 3.6 million soms were revealed in the social development departments of the Pervomai district of Bishkek, Balykchy, Chui, Aksy, Nooken and Ak-Tala districts, as well as in the Jalal-Abad mental hospital and microcredit agency "Ishker" in Osh .
Selon une etude realisee par le ministere, 31% des TPE dont le nombre est pres de 21.600 unites non clientes des associations de microcredit (AMC), souhaitent un montant de credit superieur a 50.000 DH.
A representative of the Central Bank of Uzbekistan noted that presently, only 36 microcredit organizations are operating in the republic, while commercial banks have about 900 branches and 7,800 mini-banks in the regions.
The ceiling for microcredit loans will be doubled from 20,000 to 40,000 Tunisian Dinars, to increase the range of potential beneficiaries; from income generating
A series of trials has underscored the importance of microcredit program design, and, in many cases, these schemes simply don't do much good in eradicating poverty.
By means of a distinguished approach to granting credit, microcredit programs stand out as a socioeconomic alternative of social insertion and the fight against poverty (Arbolino, Carlucci, Cira, Yigitcanlar, & Ioppolo, 2018; Bezboruah & Pillai, 2017; Dutta & Banerjee, 2018), placing the credit granted as a propellant for formal and informal microenterprises (Alves & Camargos, 2014).
Professor Muhammad Yunus DUBAI: The microcredit model has proved that millions of women can become entrepreneurs without any training or education, according to Nobel laureate Professor Muhammad Yunus.