Lending small sums – sometimes only $50 – to poor families, groups or businesses (having, say, 10 employees or less) who are not creditworthy for commercial financing. This helps start an enterprise that will lead them out of the poverty trap. Repayment of the first loan will usually entitle the borrowers to a second and third loan, thus not only creating a basis for family income and security but at the same time teaching self-sufficiency and good business practices.
As of 1993, in 33 years of operation in Latin America and the Caribbean, the Inter-American Development Bank (IDB) had made 33 loans for US$ 963 million to finance micro-enterprise and tourism projects costing a total of US$ 1,900 million. In 1993, US$ 25.6 million were approved for 54 Small Projects programmes, 30 for rural micro-entrepreneurs and 24 for urban micro-entrepreneurs. A further US$ 77.6 million were approved for micro-enterprises in Colombia, El Salvador and Nicaragua.
In 1996, UNDP reported that an estimated 10 million people worldwide have taken part in thousands of microcredit schemes. The goal is to launch a global movement to reach 100 million families with credit for self-employment by the year 2005.
All microlenders combined in Latin America have reached less than 5 percent of the potential market.