The concept of microcredit gained prominence in the 1970s, largely due to the efforts of Dr. Muhammad Yunus, founder of the Grameen Bank in Bangladesh. Yunus's model involved providing small loans to poor entrepreneurs without requiring collateral. His pioneering work demonstrated that even small amounts of capital could have a significant impact on reducing poverty and fostering economic development. In 2006, Dr. Yunus and the Grameen Bank were awarded the Nobel Peace Prize for their efforts.

Target Audience: Microcredit is typically aimed at marginalized populations, including women, rural dwellers, and small-scale farmers, who do not have access to traditional banking services.

Loan Amounts: Loans are usually small, often ranging from $100 to $1,000, though the amount can vary based on the borrower’s needs and the microfinance institution’s policies.

Lending Mechanisms: Microcredit can be disbursed through various mechanisms, including individual lending, group lending, and community-based approaches. Group lending, where borrowers form small groups and take joint responsibility for repayment, is particularly common and effective in ensuring high repayment rates.

Repayment and Interest: Borrowers repay the loans in small installments over a predetermined period. Interest rates are generally higher than those of conventional banks, reflecting the higher risk and administrative costs involved in micro-lending.

Economic Empowerment: Microcredit empowers individuals by providing them with the financial resources needed to start or expand small businesses, leading to increased income and economic stability.By enabling income-generating activities, microcredit helps lift individuals and families out of poverty. It provides the means to invest in education, healthcare, and housing.