World Wide Words

From the Turns of Phrase section

Microcredit

This relatively new term achieved widespread publicity as a result of the first Microcredit Summit held in Washington in early February. Microcredit is the name given to small loans made to very poor people who would normally be regarded as bad financial risks and so be unable to obtain funds through conventional banks (some economists call this the capital gap). Though still a long way from the financial mainstream, many governments now see microcredit as an effective way to build up local enterprise and reduce unemployment; they include not only countries like Bangladesh, where the Grameen Bank has been a pioneer, but also industrialised areas such as North America and Australia, where microcredit meets special needs. It is generally agreed that women should be the prime recipients of loans, as they are better risks than men and the loans have greater impact. The World Bank has issued a number of papers on the subject and has set minimum standards of reporting from microcredit institutions. Another term for this technique is informal credit and the lenders have been called barefoot banks by analogy to Chinese barefoot doctors. The term has been joined in recent years by others beginning in micro- that relate to aspects of the process: microbusiness, microenterprise, microfinance, microlender, and microbank.