Microfinance: A boon for rural India

Abstract

Traditionally, people of India have saved funds and generated capital from small and individual sources by developing self-help groups to support their needs and to also help people in need. This has been done particularly to support farming ventures and to start small agricultural businesses. Thus the concept of microfinance is not new to India. Microfinance is the provision of banking and financial services to those in need or those unbanked and lower strata of the economy where such services are usually not available. Microfinance program is an initiative undertaken by various self-help groups and microfinance institutions (MFIs), primarily, with the help of NABARD to help rural India sustain themselves, to provide them with a livelihood, to reduce poverty, to help farmers pay their debts and to help rural communities uplift their economic and social status. There are more than 30% people who are living below the poverty line in India without access to basic needs. Thus microfinance plays a vital role in to help rural people provide access to basic banking services and their need to be debt free. Formal banking sector has not been able to effectively cater to the needs of rural sector, thus microfinance came into play which is purely dedicated to providing a range of financial services to the rural households. In India, the concept of microfinance is blooming with the help of government agencies that have been instrumental in providing services to the poor household on a regular basis. This paper attempts to study the position of microfinance in rural India, the achievements of various institutions and the road ahead.