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Economics

Microcredit Repayment Structures and Default Risks

Quick fact

In classic Grameen Bank microcredit, borrowers must repay in weekly installments, and small groups of 5 borrowers share joint liability: if one member defaults, the others must cover her payment.

Why this is interesting

Imagine borrowing money to start a small business, but you can't offer any collateral. How do you convince a lender you'll pay back? This is the challenge microfinance solves—and it shapes how borrowers repay and default.