Onlend

A country which has experimented with this approach in recent years is Sri Lanka (Sanderatne 1989) where NGOs not only borrow and onlend directly but also give guarantees to the banks (although these are kept hidden from borrowers) or sometimes merely their "approval" to a loan, and assist in its recovery.

Availability of credit boosts nominal aggregate demand by changing volume of liquidity available to banks, which the latter then onlend.

Some studies have found clients use microcredit for money lending. Instead of investing in a so-called productive activity or covering a family expense, clients onlend to their entourage, often with interest. MFIs antagonistic to usurers naturally condemn such practices. In our opintion, however, onlending should not be automatically judged as a digression or anomaly of the system, but rather a natural (even rational) outcome.