Credit is one of the key financial services that was first offered to low-income populations in the beginnings of the microcredit movement. Microcredit refers to very small loans to low-income people. Because most microcredit clients have little or no collateral, microcredit providers instead often turn to a person’s “social collateral” by working with groups of borrowers who guarantee each other’s loans. These small-denomination group loans were the first product offered by the microfinance sector and were provided to help those seeking to start or invest in a small business or agriculture. The idea is that productive businesses generate income that allows clients to repay their loans and begin to build assets to lift themselves out of poverty.
Research demonstrates, however, that microcredit is often used for a variety of purposes beyond business investment. Loans also help people cope with unpredictable incomes by making funds available to meet their basic needs and manage shocks, such as death or illness. Financial service providers are working to better understand the financial needs of low-income people and design products with those needs in mind.
What can you find in this Topic Hub?
Curated by FinDev editors, this Topic Hub offers you access to key resources contributed by organizations around the world who work on the topic of microcredit. Our latest blogs and publications on this topic are featured here (in the Resources Tab above), and you can find a collection of papers, case studies and guides to explore further. When there are upcoming webinars, events and recent news on this topic, they will be featured in the Topic Hub as well, so make sure to come back regularly for the latest on this topic. Finally, we’ve selected some key additional resources, which are listed on the right here, where you can learn even more about this topic.
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Results from a recent survey in Kenya question the impact of flexible loan terms on how much credit smallholder farmers take up. But the issue may be that loans were still not flexible enough.
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