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The concept of micro credit has been around for a while. Recall that Muhammad Yunus together with Grameen Bank were awarded the Nobel price in this context.

I don't have references at hand but I heard that the interest rate that obligors pay for such loans are quite high (but they would pay even more at standard banks if they gave them money at all). The cost per credit are high too - which is a problem. On the other hand micro credit can be seen as development aid - a sales argument.

All together the concept could be a great field for mutual-funds (I saw one or two).

My question: why is the concept of micro credit not more fashionable (maybe some quant/economic reasons)? Who are the players? Do there exist large mutual funds or other securities to participate in this kind of business? I know that there are platforms - but they are not-for-profit directly to retail customers - right?

EDIT: I just found a guardian article that describes the problems of the concept of micro credit business in South Africa. If I read this correctly then the concept did not help the poor there to get out or poverty.

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Micro finance did not work in certain parts of South Africa. That's not surprising. Neither this, nor anything else is a "panacea" (cure-all) for various financial problems.

Micro finance apparently works in SOME parts of the world (India, Bangladesh, etc.), where the ethos and institutional framework make it viable. It may work better with women (who have less access to other credit and are more susceptible to peer pressure), than with men.

Practically by definition, microfinance is not highly scalable. It works, if at all, "locally," where local lenders know and understand local entrepreneurs. That's why it doesn't lend itself well to large institutional activity from e.g., mutual funds.

The fact that it works SOMEWHERE is very much to its credit, and probably what won it the Nobel Prize. In so doing, it made the world's financial "space" somewhat more "complete" than it would otherwise be.

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