Microfinance as an Anti-Poverty Vaccine for Rural India

Analyzing the success and scope of microfinance in rural India
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This paper explores the potential for MFIs in rural India. It analyzes the evolution of microfinance, structure of microfinance programs and role of MFIs in poverty alleviation in the country.

Though India ranks among the world’s top 15 economies in terms of GDP, around 80 million households in the country live below the poverty line. A huge majority of this population has no access to formal credit. The paper illustrates how microfinance interventions can catalyze social and economic development in rural India. It identifies factors contributing to the success of microfinance from the perspective of NGOs and commercial lending organizations.

The paper presents innovative microfinance marketing models that have made a positive impact in rural India. They include:

  • Contract farming and credit bundling;
  • Agri-service centers with a range of products including inventory finance, such as those established by Rabo India Finance;
  • Non-traditional markets, such as the auction markets for horticultural products established by Mother Dairy Foods Processing;
  • Apni Mandi or farmers’ markets launched by the Punjab Mandi Board.