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Difference Between Microfinance and Microcredit – Microcredit Vs. Microfinance | Management Notes

Difference Between Microfinance and Microcredit

What do you mean by microfinance?

Microfinance is the process of extending financial services to those people who have low income and it becomes hard for them to get finance from the banks and other private money lenders. The living standard of the poor and the people having no jobs can be improved with the financial practice of microfinance. Simply, Microfinance means the broad spectrum of financial services such as loans, insurance, savings etc. provided to the people of low-income groups.


Microcredit is an aspect of microfinance which includes all types of loans that financial institutions, such as banks and insurance companies, provide to poor or unemployed individuals.

What is the purpose of microcredit?

The purpose of microcredit is to make the people self-employed as it is a small amount of loan that is provided with a low-interest rate to the people who are below the line of poverty.

Difference Between Microfinance and Microcredit

Some of the major difference between Microfinance and Microcredit are as follows:




Definition Micro-credit is the small loan facility provided to the people with less earning, to motivate them to become self-employed. Micro-finance refers to the number of financial services provided to the small entrepreneurs and enterprises who cannot take shelter of banks for banking and other services.
Services Micro-credit includes only credit forms of activities. Micro-finance includes credit activities and non-credit activities like savings, pension, insurance, etc.
Component Micro-credit is an aspect or we can say a component of microfinance.  Microfinance is a whole concept. 
Need Micro-credits are small size loans with shorter repayment periods. They are granted for small-scale activities that direct to serve local needs. Microfinance services help to low-income individuals and start-up in developing countries to start running a small business, increase assets, diminish risk, raise productivity, increase return on investments, increase incomes, improve access to education and eventually increase the welfare.


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