Role of Microfinance in Financial Inclusion in India

Microfinance Institutions In India

Microfinance concept started with the idea of providing financial services to the poor who are otherwise considered un-bankable or credit-unworthy. Modern microfinance concept revolves around the activities of the Grameen Bank which were pioneered by Nobel Laureate Dr. Mohammad Yunus. The initial success of Grameen Bank in alleviating poverty brought this concept into the global limelight and has led to micro-finance being populated as a panacea for poverty and under-development across the world. The basic principle of microfinance is that a group of individuals is more bankable than a single individual. Micro financing loans are small loans granted to the basic sectors, on the basis of the borrower’s cash flow and other loans granted to the poor and low-income households for their microenterprises and small businesses to enable them to raise their income levels and improve their living standards. The main aspect of micro credit is that the loan is given without the requirement of any collateral security and the lender has nothing to fall back on, other than the intangible assurance of the borrowing group.