Spreading of Microfinance in India: Some Challenges

Providing recommendations to increase the outreach of MFIs in India
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This paper attempts to understand the evolution of the microfinance industry in India and underlines the critical challenges limiting the spread of microfinance across the country. It highlights the history, present scenario, and the future of microfinance and provides recommendations to help deal with the various challenges in the sector. The paper covers various trends such as growth index, annual growth rates, and equity investment in MFIs to summarize the growth and spread of MFIs over the past few years. It also discusses the regulatory framework for microfinance and highlights the different providers of microfinance services in the country. The paper recommends that MFIs should:

  • Identify and set reasonable and achievable growth targets for profit and return on investments;
  • Ensure that micro loans are utilized for productive purposes or employment generation activities and not utilized for repayment of existing loans;
  • Provide repayment options with enhanced flexibility and try to understand the perspective of clients;
  • Make loans more accessible without compromising on the surety of recovery by involving women as well as men in the loan process;
  • Ensure that the borrowers are authentic and they repay the loans without any fail.

About this Publication

By Gangadhar, C.S. , Malyadri, P.