Microcredit is the extension of very small loans (microloans) to those in poverty designed to spur entrepreneurship. These individuals lack collateral, steady employment and a verifiable credit history and therefore cannot meet even the most minimal qualifications to gain access to traditional credit. Microcredit is a part of microfinance, which is the provision of a wider range of financial services to the very poor.

In general, microloans have benefited women more than any other group.

Small loans (not charity) offered at minimal interest to individuals participating in borrowing groups or working with loan facilitators - often under $1000
Low interest rates, fair loan terms
Borrowing group members encourage each other, help each other repay loans
May be local banking operations, or loans facilitated from other individuals through websites

Grameen Bank- first microlending institution, led by Muhammad Yunus
Founded in Bangladesh
8 million borrowers as of 2010
97% of borrowers are female
Loans are offered for creating self-employment for income-generating activities and housing for the poor, as opposed to consumption
To obtain loans a borrower must join a group of borrowers (reinforces community responsibility and support)

Microcredit is a financial innovation that is generally considered to have originated with the Grameen Bank in Bangladesh. In that country, it has successfully enabled extremely impoverished people to engage in self-employment projects that allow them to generate an income and, in many cases, begin to build wealth and exit poverty.

Due to the success of microcredit, many in the traditional banking industry have begun to realize that these microcredit borrowers should more correctly be categorized as pre-bankable; thus, microcredit is increasingly gaining credibility in the mainstream finance industry, and many traditional large finance organizations are contemplating microcredit projects as a source of future growth, even though almost everyone in larger development organizations discounted the likelihood of success of microcredit when it was begun.

The United Nations declared 2005 the International Year of Microcredit.

One lender in the US (for example) can disperse small loans across many countries
Multiple lenders can group their resources to make loan to single recipient
Multiple recipients can join forces to ask for a single loan that they will work together to repay

In the past few years, savings-led microfinance has gained recognition as an effective way to bring very poor families low-cost financial services. For example, in India, the National Bank for Agriculture and Rural Development (NABARD) finances more than 500 banks that on-lend funds to self-help groups (SHGs). SHGs comprise twenty or fewer members, of whom the majority are women from the poorest castes and tribes. Members save small amounts of money, as little as a few rupees a month in a group fund. Members may borrow from the group fund for a variety of purposes ranging from household emergencies to school fees.

Capital to develop small businesses or buy livestock
Increased prosperity throughout the community (think Third World Farmer; more resources in the community means more structural improvements and overall development)
Increased personal agency for borrowers
Increased opportunities for women to be entrepreneurs