White Paper on Microfinance: Issues and Analysis
This paper discusses the issues that the microfinance sector and microenterprises face in India. Poor people need access to credit and opportunity to exploit their talent. Absence of employment and collateral makes them non-bankable and reduces their opportunities to access credit. In developing countries like India, lack of bank loans forces poor people to borrow money from moneylenders, who charge high interest rates. Various financial institutions have emerged in recent years to counter these problems. Microfinance helps poor people access financial services. It is one of the most effective and flexible strategies in the fight against global poverty and can be implemented on the massive scale necessary to respond to the needs of those living on less than $1 a day. Primarily, microfinance focuses on providing relatively small loans to poor people who have no access to formal banking services. Savings are also a very important part of microfinance services. Microfinance is a dynamic field and many delivery models have evolved over a period of time. The paper discusses:
- Microfinance delivery models;
- Problems affecting MFIs;
- Reasons for the bad performance of microenterprises.
