This involves small-value loans to individuals who want to start a business, but lack the income or collateral needed for conventional borrowing.

The purpose of microcredit is to enable individuals to launch a project or business. Although microcredit varies from one lender to another, the common features are the small amounts lent, the favourable terms and the fact no collateral or security is required.

The concept of microcredit was pioneered by Muhammad Yunus, a Bangladeshi entrepreneur, who was awarded the Nobel Peace Prize in 2006 and the Prince of Asturias Award for Concord in 1998 for his work. Yunus began lending small amounts of money to disadvantaged Bangladeshi people to help them set up their small businesses and obtained excellent results, leading to the creation of the Grameen Bank.

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