Derby City Council is aiming to reduce poverty and the influence of loan sharks, by setting up a company to help people who cannot get credit.

Derbyloans is designed to help victims of "financial exclusion" - those unable to deal with high street businesses.

The project is being set up with the help of Rolls-Royce and backing from the European Union.

It is expected to start handling money in 2003.

Rolls-Royce is helping with Derbyloans

A council spokesman said: "Up to 50% of the households in some parts of the Derby have an income of less than half the national average.

"In those same areas, less than 50% of adults have access to a current bank account and other banking services.

"This is the problem of financial exclusion - where those least able to afford it end up paying most for the credit that all of us need at time or another."

Derbyloans is also designed to help those who want to start a business or become self-employed but do not have a track record in what they want to do and find it hard to raise the money.

The first phase of the project is being funded by the European Regional Development Fund with support from Rolls Royce and the Derbyshire and the East Midland Development Agency.