Microcredit is the extension of very small loans (microloans) to impoverished borrowers who typically lack collateral, steady employment, or a verifiable credit history. It is designed to support entrepreneurship and alleviate poverty. Many recipients are illiterate, and therefore unable to complete paperwork required to get conventional loans. As of 2009 an estimated 74 million people held microloans that totaled US$38 billion. Grameen Bank reports that repayment success rates are between 95 and 98 percent.
Microfinance is a category of financial services targeting individuals and small businesses who lack access to conventional banking and related services. Microfinance includes microcredit, the provision of small loans to poor clients; savings and checking accounts; microinsurance; and payment systems, among other services. Microfinance services are designed to reach excluded customers, usually poorer population segments, possibly socially marginalized, or geographically more isolated, and to help them become self-sufficient. ID Ghana is an example of a microfinance institution.
Grameen Bank is a microfinance organisation and community development bank founded in Bangladesh. It makes small loans to the impoverished without requiring collateral.
Bina Swadaya is a large Indonesian NGO focused on development.
Opportunity International is a 501(c)(3) nonprofit organization chartered in the United States of America. Through a network of 47 program and support partners, Opportunity International provides small business loans, savings, insurance and training to more than 14 million people in the developing world. It has clients in more than 20 countries and works with fundraising partners in the United States, Australia, Canada, Germany, Switzerland, Singapore, Hong Kong and the United Kingdom. Opportunity International has 501(c)(3) status as a tax-exempt charitable organization in the United States of America under the US Internal Revenue Code.
Cooperative banking is retail and commercial banking organized on a cooperative basis. Cooperative banking institutions take deposits and lend money in most parts of the world.
Freedom from Hunger is an international development organization working in nineteen different countries. Rather than provide food aid, Freedom from Hunger focuses on providing small loans and business education to poor women. It is a nonprofit, nongovernmental, nonsectarian organization classified by the IRS as a 501(c)(3) charity. It was evaluated in 2011 by GiveWell, who found their programs had little to no lasting impact.
National Bank for Agriculture and Rural Development (NABARD) is an apex regulatory body for overall regulation of regional rural banks and apex cooperative banks in India. It is under the jurisdiction of Ministry of Finance, Government of India. The bank has been entrusted with "matters concerning policy, planning, and operations in the field of credit for agriculture and other economic activities in rural areas in India". NABARD is active in developing and implementing financial inclusion.
The non-governmental organisation based in Bangladesh which provides microcredit financing.
Village banking is a microcredit methodology whereby financial services are administered locally rather than centralized in a formal bank. Village banking has its roots in ancient cultures and was most recently adopted for use by micro-finance institutions (MFIs) as a way to control costs. Early MFI village banking methods were innovated by Grameen Bank and then later developed by groups such as FINCA International founder John Hatch. Among US-based non-profit agencies there are at least 31 microfinance institutions (MFIs) that have collectively created over 800 village banking programs in at least 90 countries. And in many of these countries there are host-country MFIs—sometimes dozens—that are village banking practitioners as well.
A rotating savings and credit association (ROSCA) is a group of individuals who agree to meet for a defined period in order to save and borrow together, a form of combined peer-to-peer banking and peer-to-peer lending.
Solidarity lending is a lending practice where small groups borrow collectively and group members encourage one another to repay. It is an important building block of microfinance.
Financial inclusion is defined as the availability and equality of opportunities to access financial services. It refers to a process by which individuals and businesses can access appropriate, affordable, and timely financial products and services. These include banking, loan, equity, and insurance products. Financial inclusion efforts typically target those who are unbanked and underbanked, and directs sustainable financial services to them. Financial inclusion is understood to go beyond merely opening a bank account. It is possible for banked individuals to be excluded from financial services. Having more inclusive financial systems has been linked to stronger and more sustainable economic growth and development and thus achieving financial inclusion has become a priority for many countries across the globe.
Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 of India, engaged in the business of loans and advances, acquisition of shares, stock, bonds, hire-purchase insurance business or chit-fund business, but does not include any institution whose principle business is that of agriculture, industrial activity, purchase or sale of any goods or providing any services and sale/purchase/construction of immovable property.
The SIDBI foundation for Microcredit (SFMC)
Society for Elimination of Rural Poverty (SERP) is an autonomous society of the Department of Rural Development, Government of Andhra Pradesh. SERP is implementing Indira Kranthi Patham (IKP), a statewide community driven rural poverty reduction project to enable the poor to improve their livelihoods and quality of life through their own organizations. It aims to cover all the rural poor households in the state with a special focus on the poorest of the poor households. SERP also played an active part in the relief efforts taken up by the Andhra Pradesh Government during the devastating Indian Ocean tsunami in 2004.
Microfinance Institutions Network is an association for the microfinance sector in India. Its member organizations constitute the leading microfinance institutions in the country.
The Rajiv Gandhi Mahila Vikas Pariyojana (RGMVP) is the flagship programme of Rajiv Gandhi Charitable Trust, a registered non-profit institution, working for poverty reduction, women empowerment and rural development in Uttar Pradesh, India since 2002. RGMVP believes that "the poor have a strong desire and innate ability to overcome poverty". It aims to organise poor rural women into community institutions and promotes financial inclusion, health-care, livelihood enhancement, education and environment.
The impact of microcredit is a subject of much controversy. Proponents state that it reduces poverty through higher employment and higher incomes. This is expected to lead to improved nutrition and improved education of the borrowers' children. Some argue that microcredit empowers women. In the US and Canada, it is argued that microcredit helps recipients to graduate from welfare programs. Critics say that microcredit has not increased incomes, but has driven poor households into a debt trap, in some cases even leading to suicide. They add that the money from loans is often used for durable consumer goods or consumption instead of being used for productive investments, that it fails to empower women, and that it has not improved health or education.
Community banking is a non-traditional form of money-lending. Unlike banks or other classic lending institutions, the funds that community banks lend to borrowers are gathered by the local community itself. This tends to mean that the individuals in a neighborhood or group have more control over who is receiving the capital and how that capital is being spent. This practice has existed in some form for centuries; in ancient Egypt, for example, when grain was often used as currency, local granaries would store and distribute the community’s food supply. Since that time, a variety of community banking models have evolved.
