Microcredit loans are used widely in developing countries as an effective tool for poverty alleviation. These short-term loans are designed to give opportunity to impoverished entrepreneurs to set up a small-scale business by assisting with start-up costs and providing a foundation of capital. Borrowers are generally those who lack collateral, a verifiable credit history and steady employment. For this reason repayment schemes are deeply embedded in a spirit of trust and integrity.
Microfinance programs have proven beneficial in not only empowering individuals but also transforming whole communities as local markets thrive on greater service availability, competitive pricing, greater employment opportunity and increased cash flow to stimulate further growth. Beneficiaries report that they are able to eat regular meals more often, send their children to school and afford adequate healthcare.