Micro-Finance is the extension of very small loans 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. Studies have actually shown that the credit risks on the loans are actually lower than most consumer loans in some developed countries, such as the U.S. 

Micro-lending is a financial innovation that is generally considered to have originated with the Grameen Bank in Bangladesh, and gained significant notoriety when the banks founder,  Dr. Muhammad Yunus won the Nobel Peace Prize in 2006 for his innovations in micro-lending, and later in 2007 when he released his book, “Banker to the Poor”. 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.  These very small loans, sometimes only $100, often can change the livelihood of an entire family, and provide a return for the investor.

Due to the success of micro-credit, it is increasingly gaining credibility in the mainstream finance industry, and many traditional large finance organizations, such as Citigroup, are contemplating microcredit projects as a source of future growth.