This is a really big thing in the developing countries, esp. on the Indian subcontinent. The idea is to address the following structural problem. Most business operations in third world countries are "micro-enterprises" - basically a one or two person operation on a roadside with little capital and no access to credit. Commercial banks do not want to deal with such folk because they pose high risk and have no collateral to secure the bank's investment. As a result, these operations cannot obtain credit to finance their development.
One response to that credit shortage was local credit associations (e.g. stokvels in South Africa) usually by women. The idea was that women from a single village or otherwise having social ties would pool their resources and loan them to whoever in the circle needed them for their business - the social bond was the guarantee of repayment. But of course such operations have natural limits.
The big name in microcredit is Grameen Bank http://www.grameen-info.org/ which started in Bangladesh - but you can Google other institutions as well.
Personally, I think this is an excellent idea because it solves several problems at the same time:
- it provides credit to local people who otherwise have no access to credit - it counter-weighs influence of international development institutions that favor capital intensive projects (cash crops, dams, etc) that benefits international capital rather than local population - it bypasses local officials who as a rule are corrupt to the bone and manage to steal most if not all development money - it does not destroy local solidarity ties by replacing it with market relations.
Wojtek