Microfinance vs Microcredit

Microfinance and microcredit are related terms that are often used interchangeably, but they refer to different things. Here are five key differences between microfinance and microcredit:

Scope: Microfinance refers to a broader range of financial services, including not just credit but also savings, insurance, and other financial products. Microcredit, on the other hand, refers specifically to the provision of small loans to low-income individuals.


Purpose: Microfinance is designed to provide a range of financial services to low-income individuals to help them improve their economic circumstances. Microcredit, on the other hand, is focused solely on providing access to credit to help individuals start or expand businesses.


Repayment: Microfinance loans are typically repaid over a longer period of time and may have lower interest rates than microcredit loans. Microcredit loans, on the other hand, are typically shorter-term loans with higher interest rates and may require more frequent payments.


Target market: Microfinance is designed to serve a broader range of low-income individuals, including those who may not be interested in starting a business. Microcredit, on the other hand, is specifically targeted at individuals who are interested in starting or expanding a small business.


Impact: While both microfinance and microcredit can help individuals improve their economic circumstances, microfinance has a broader impact on poverty reduction and financial inclusion by providing a range of financial services to low-income individuals. Microcredit, on the other hand, has a more targeted impact on entrepreneurship and small business development.