Full Text

Microcredit

BECKY YANG HSU

Subject Banking and Finance
Sociology » Economic Sociology

Key-Topics capitalism, finance

DOI: 10.1111/b.9781405124331.2007.x


Extract

Microcredit is the practice of distributing very small loans to people who have a very low income as a means of poverty alleviation, global aid, and development. Microcredit is a subset of the broader category of microfinance, which includes all financial services such as insurance and money transfers. The very poor often do not have access to any financial services, and microcredit enables individuals to borrow for a profit-making enterprise, in hopes of beginning an upward spiral out of poverty. One hundred and fifty million people have participated as borrowers in microfinance programs (Armendariz and Labie, 2011). The idea of giving very small loans to people who do not have access to banks has existed for a long time, but the current interest began to rise with experimental programs in the 1970s related to the Self-Employed Women's Association in India and the Grameen Bank in Bangladesh ( Rose, 1992 ; Yunus, 1999 ). Since then, microcredit has garnered a great deal of attention. The excitement about microcredit's being the answer to the world's poverty problems culminated with the proclaimed goal of alleviating all poverty through the practice of microcredit by the year 2005. In 2006, the Nobel Peace Prize was awarded jointly to Muhammad Yunus (the founder of the Grameen Bank) and to the Grameen Bank itself. The main innovation in microcredit is the use of “social collateral” ... log in or subscribe to read full text

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