Microcredit

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Related to Micro-Loan: Micro lending, Micro Lender

Microcredit

A form of lending that originated in the 1970s with small loans made to very small enterprises in Bangladesh, called micro-enterprises, with the intention of alleviating high poverty levels. Microfinance institutions (MFIs) issue micro-loans that have higher-than-normal interest rates meant to cover the high costs associated with issuing small loans. Given that the purpose of microcredit is to be a poverty relief mechanism, individuals with low credit scores who lack capital and steady employment are then able to receive loans to develop their enterprises. See: Microfinance

Microcredit

The practice of making loans to extremely poor persons to help them rise from poverty through entrepreneurship. That is, one may make a loan of, say, $25 which gives someone the start-up capital necessary to make something small to sell. Microcredit loans are usually either interest-free or carry interest that does not compound. Additionally they offer flexible repayment plans; generally one is asked to pay anything one can so long as one pays something. Microcredit is most common in the developing world; it started in Bangladesh in the 1970s. See also: Grameen Bank, Mohammed Yunus.
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While about half of the loans have been repaid and the businesses are still in operation, some of the micro-loan recipients have gone bankrupt, or out of business, and never paid the money they owed.
Formerly known as 360buy retailer now called Jing Dong has established a micro-loan firm to provide finance to its suppliers online shopping platform.
More information about the micro-loan program at First Tennessee is available by visiting www.
Dan Hollingsworth, the EDC's executive director of business development, said the EDC is using some of its other entrepreneurship programs--Summer Company and Starter Company are examples--as models for the micro-loan program.
The objective of this article is to examine the status and nature of micro-finance throughout the world, including a specific focus upon the United States, to probe the costs of micro-finance to loan recipients, to better understand the strengths and weaknesses of third-world and American micro-loan programs, and to offer policy implications and guidance to governments, to small business owners, and to those who consult to and assist nascent entrepreneurs and other small businesspeople who might avail themselves of such financing.
The micro-loan program is a not-to-exceed $50,000 loan product designed for people with viable business ideas who aren't quite bankable yet.
Those with the best ideas will be rewarded with a micro-loan up to $5,000.
However, micro-loan innovators, beginning with Muhammed Yunus through his work in Bangladesh with Grameen Bank (Khandker 1998), have managed to overcome the issues of moral hazard and adverse selection by loaning to mutually responsible groups.
The business center received $50,000 in 1998 under the micro-loan program for HUD-eligible economic development activities under the Community Development Block Grant program.
Participants then visited a local family due to receive the rotating micro-loan funded by them as an exchange for the workshops.
In partnership with existing microfinance institutions, it profiles people around the world in need of a micro-loan, then socially-minded lenders choose which person to loan money to and Kiva organizes the rest.
Since then, various forms of the micro-loan concept have appeared.