Microfinance, microcredit and microloan

Photo of author


Microfinance, microcredit and microloan are terms that came into use in the mid-1970s when these practices were pioneered. We will examine the definitions of the terms microfinance, microcredit and microloan, where these words came from and some examples of their use in sentences.

Microfinance is a system of banking services made available to clients who are not served by traditional banks because of their location and poverty. Usually, the mission of microfinancing institutions is to aid small business owners by providing microcredit in the form of a microloan as seed money for starting a business. In the United States, as large an amount as $16,000 may be considered a microloan, while in poorer countries such as Bangladesh or Sri Lanka a microloan may be as little as $25. The concept of microfinance in the form of microcredit and microloans was pioneered in the mid-1970s by Mohammed Yunus as well as The Women’s World Baking organization founded by Michaela Walsh, Ela Bhatt and Esther Ocloo. Recipients of microloans through a microfinance institution are afforded low interest rates. Microfinance organizations are generally non-governmental institutions as well as non-profit. Microfinance, microcredit and microloan were coined by adding the prefix micro- to the words finance, credit and loan. Micro- is derived from the Greek word mikros, meaning small. Microfinance, microcredit and microloan are sometimes seen with hyphens, as in micro-finance, micro-credit or micro-loan, but the Oxford English Dictionary lists the words without hyphens.


Nobel Peace Prize winner and Bangladeshi social entrepreneur Muhammad Yunus says microfinance could work as well in New Zealand as it has in his home country to solve problems associated with poverty. (The National Business Review)

Jakarta Deputy Governor Djarot Saiful Hidayat has promised a microcredit scheme for street vendors in the capital if he and Jakarta Governor Basuki “Ahok” Tjahaja Purnama are reelected. (The Jakarta Post)

These microloans typically benefit farmers and other agrarian workers, who can immediately invest the cash into livestock. (The Philadelphia Citizen)