Micro-lenders lend out a small amount of money to (mostly) rural borrowers. These are truly small amount of money – £5, $50, $100, $250. These borrowers (predominantly female – more on this later) would use the small amount of cash to buy a sewing machine or some chicken (or a goat), and that would be the foundation of a cash flow generating business. Borrowers will get a shot at acquiring a cash flow that may pay back the loan and grow into larger and more sustaining operations in the future.
The group in #1 is important – it is a way to add “social collateral” to the process. It is easier for one person to default (or run away from the village), but it will be hard for a group of people’s social standing if they let one of their members default.