Microcredit

The term ‘micro’ means very small and microcredit represents very small loan amount. These loans are also known as microloans. Microcredit programs are mainly developed for providing financial assistance to all those who are otherwise not considered for any kind of credit facilities offered by the commercial banks. The financial institutions like banks need some kind of collateral to offer loans. At the same time, banks are always concerned about the repayment and more than that the source of income of the borrower. But the microcredit programs are designed to help the unemployed or the poor people to arrange a source of income for themselves.

Microcredit is necessary for the economies that are still in their developing phase. Through microcredit programs, the people in such an economy can try to develop their financial status. With the positive results of the microcredit programs, a number of commercial banks and other credit providing organizations are also becoming interested in providing microloans
History of Microcredit
The concept of microcredit is not new. It started as a part of the reconstruction and development plans after the World War II. The traces of microfinance can also be found in several writings of mid-nineteenth century. So it is not a new concept but the results of implementing the idea of microcredit have really been surprising for the whole world. At present, there are almost 7,000 microfinance institutions that are providing microcredit facilities to the needy people throughout the globe. Almost 16 million people are covered through these institutions. At the same time, a number of microcredit programs are designed for providing services to the underprivileged women.

Microcredit Institutions of the World

Grameen Bank
Friends of Women’s World banking
Opportunity International
TMSS
Women’s World Banking
SKS India
FINCA International
Opportunity International

Basic Principles of Microcredit
The concept of microcredit is based on a number of principles. Some of these principles are the following:

The concept of microcredit has been developed on the belief that the poor people also posses the same quality and skills that the big business operators have. So the concept believes to provide financial assistance as a tool of development to these people
Microcredit believes that modified age old processes are not sufficient for the development of the poor and so investment in those self sufficient organizations that are related to the development of the economically backward masses are very important. It can also stimulate the economic development of the country
The traditional banks are not the suitable organizations to provide microcredit facilities to the poor and the unemployed because these banks are already involved in big projects. So new institutions are necessary. Because of this, the microfinance organizations are provided with the responsibility to offer microloans to the poor masses.

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Last Updated on : 1st July 2013

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