Microcredit

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Related to microloan: microlending, 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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A microloan is often used by early-stage startup businesses or other small businesses and below is how microloans work in a nutshell:
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Training the microloan recipients is crucial, but until now, it was a costly affair.
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A credit union helped a small-time baker grow from delivering home-baked goods to parties and weddings to placing Bundt cakes on regional grocery store chain shelves with a microloan of less than $50,000.
The United States Department of Agriculture (USDA) has announced a new microloan program designed to benefit small, nontraditional and niche farm operations.
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The federal government announced in mid-January a new low-interest, microloan program to help minorities, veterans and family farmers with the costs of renting land and buying seed, equipment and other things involved in starting a farming business.
Department of Agriculture's (USDA) microloan program earlier this year (USDA-FSA, 2013).