The recent meltdown of global financial markets linked to mortgage lending to poorer (sub-prime) households, particularly in the United States, has drawn a contrast with the relative stability of microfinance mechanisms that lend to the poor in developing countries. Microcredit schemes typically show high repayment rates and present a transparent business model, avoiding the excessive leveraging of mainstream financial institutions. This relative success is attributed to their innovative forms of group lending, whereby peer pressure serves as a substitute for collateral and group responsibility serves to minimize transaction costs. The prominent role of women as the counterparties in microfinance is often seen as another important reason for this success.

2 p. : tables