Definition
Microcredit is the extension of very small, collateral-free loans to low-income entrepreneurs to help them start or expand small businesses.
Why It Matters
It is a tactical tool of microfinance designed to bootstrap micro-businesses.
Core Concepts
- Trust-Based Lending: Loans are often secured by a handshake or group accountability rather than physical collateral.
- Entrepreneurial Catalyst: Small sums (e.g., $27) can provide the working capital needed for individuals to start tiny businesses, breaking the cycle of predatory lending and poverty.