Financial Inclusion and Microfinance in India: An Overview
This paper examines the role of microfinance in empowering people and realizing financial inclusion in India.
While there are reservations about the efficacy of MFIs in handling public money, their growth and achievements have been noteworthy. The paper states that MFIs in India want the government to empower them to mobilize savings. They have immense opportunities in microcredit given increasing demand for rural finance and the inadequacy of formal sources. It further states that NGOs have played a commendable role in promoting Self Help Groups and linking them with banks.
The paper examines recent MFI experiences and identifies a need for qualitative growth. It suggests that:
- MFIs should be better managed in terms of finance, technology and social responsibility;
- MFIs can thus upgrade from thrift and credit institutions to capacity-building and livelihood- sustaining associations of people;
- Incentive packages that motivate NGOs to diversify into other backward areas should be developed;
- Banks should evolve specific strategies to expand outreach of their services in order to promote financial inclusion.