Micro-finance
Micro-finance (MF) is a small-scale financial intermediation, inclusive of savings, credit, insurance, business services and technical support provided to the needy borrower. The thrust of the MF initiative is to channelize production and consumption credit in multiple doses based on the absorption capacity of the prospective borrower. The presumption here is that the borrowers possess basic financial literacy and requisite capacity to operate their self-determined economic ventures profitably.
Evolution of Micro-Finance
The formal existence of MF was found in 1972. A charity based model (interest free loans where repayment was based on peer pressure) of MF was evolved in Ireland. Later on, in Germany, a thrift-based model was developed with establishment of saving funds. Bangladesh Grameen model is based on the principle of trust and creditworthiness of poor with both, obligatory and voluntary saving schemes. The Foundation for Development Cooperation (FDC) of Australia evolved a research project, The Banking with the Poor (BWTP) network to link between microfinance institutions with formal financial institutions.
Micro Finance and Indian Economy
There are four important MF models prevalent in India.
MF has become a movement in India. Simultaneously it has become a unique tool of empowerment and capability enhancement.
Firstly, it has added millions of people to the banking system by developing the habit of thrift and saving.
Secondly, it helps in poverty alleviation.
Thirdly, it encourages group and individual activities which provide livelihood on a regular basis.
Fourthly, through MF, financial inclusion is possible with the common effort of Bank, NGO’s, Micro-Finance Institutions and other institutions.
Fifthly, it empowers women by making women not only economically, but socially and politically as well.
References
- Status of Micro-Finance in India 2009-10, NABARD, http://www.nabard.org/pdf/Status%20of%20Micro%20Finance%202009-10%20Eng.pdf
- http://www.nabard.org
- http://www.rbi.org.in
- http://www.indiamicrofinance.com
- http://www.microfinancegateway.org/p/site/m/
