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