**1. Introduction**

Widespread poverty, low standard of livings, and resultant depopulation of rural areas is the biggest development challenge for the world. Rural population accounts for 43.80% of the total world population and the ratio varies from region to region and country to country. South Asia has the highest percentage of its population (65.12%) living in rural areas, followed by Sub Sharan Africa (58.80%), East Asia and Pacific (39.30%), Central Europe and Baltics (37.50%), Middle East and North Africa (34%), Europe and Central Asia (27.39%), European Union (25%), Latin America and Caribbean (18.88%), and North America (17.45%). Similarly, countries like Papua New Guinea and Burundi have the largest percentage of the population (almost 87%) in rural areas, while countries like Qatar, Uruguay, Iceland have the lowest proportion of their population living in rural areas (1–4%) (World bank).

The urban-rural gap exists in the whole world and in some regions and countries it is consistently widening. Globally, rural areas have been facing endemic poverty. Estimates show that even in 2025 60% of the world's poor will be in rural areas [1]. Traditionally, the rural population has been engaged in agriculture for their livelihood. However, over the years agriculture has become less profitable and declining productivity is one of the main issues in regions like South Asia and Sub-Saharan Africa. Moreover, lack of access to essential services such as basic infrastructure, education, knowledge, markets (product and financial) is perpetuating rural poverty [2]. International Fund for Agriculture Development estimated that nearly 1 billion people in the world live on less than US\$ 1/day and 75% of them live in rural areas. Almost 90% of the rural poor do not have access to financial services. The crucial role of financial services in reducing poverty is very well established. Access to financial services can enable poor people to move forward from hand-to-mouth survival to planning for the future, acquiring physical and financial assets, investing in better nutrition, health and education. Microfinance/microcredit has attracted the attention of the world as a tool to fight poverty since Muhammad Yunus and his Grameen Bank were awarded the Nobel peace prize in 2006. As microfinance services were developed around the world it also has attracted the attention of the researchers to examine the impacts of microcredit on the recipients, community, and society. The main objective of this chapter is to discuss the role and functions of microcredit in sustainable rural development.
