Micro Credit is now a most talked about issue in the third world countries. This has proved to be an effective means for eradicating poverty. This was introduced by Nobel Laureate Dr. Mohammad Yunus, in Bangladesh in the late Seventies. If people are extended with loans and ensured that these loans are used for income generating purposes, the people do find a way to earn their living utilizing these loans and also repay the loans promptly.

The most important feature of Micro Credit is that the loan is extended to the borrower without any collateral and astoundingly the rate if repayment is very high than any commercial loan. This is because of trust, the borrowers form a small group, members of the group belong to the same neighborhood and loans are sanctioned by the lending organizations upon endorsement from the group members. The borrower is always under the peer pressure from the group members for regular repayment of the loan.

The process of repayment of the loans are also different from other traditional loans. The borrowers have to return the loan in weekly installments and generally it is refunded within a year. It is easy to repay as the size of the installments are small and even if the borrower fails to repay the installment in one week, he can repay the both the installments in the following week, thus he is not a defaulter. This is one of the main reasons for the success of micro credit.

Generally women have proved to become more responsible in managing the loans in comparison to men. In Bangladesh, more than ninety percent of the borrowers of micro credit are women. They could change their lives, increase their standard of living through this miraculous economic tool of micro credit.