How Microfinance & Group Lending Works

Learn more about microfinance and Grameen America’s unique model created by Professor Yunus:

What is microfinance?

Microfinance is made up of a variety of financial services usually available to low-income entrepreneurs. Microcredit is the most widely used component of microfinance but there are other microfinancial instruments such as microinsurance and microenergy, which are slowly becoming accessible to people in impoverished areas. The advantage to these programs is that they are largely distributed without the need for prior credit history, collateral or bank approval.

What is microcredit?

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.

What is the “group lending model”?

Grameen America requires prospective borrowers to form or join a group of five members, who meet weekly. These groups are organized into “centers”, with 3 to 6 groups to a center.  Centers meet weekly in borrowers’ homes or a local community center. The group and center model encourages a culture of financial responsibility where peer-support leads to 99% rate of repayment. The group also serves as a social network of voluntary mutual support, as members are individually responsible for their own loans, they are expected to voluntarily provide assistance to their peers where needed.

Click here for a visual Grameen Microfinance model.

For more information on microfinance and Grameen America, go to

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