What is microfinance?-Microfinance benefits in India

December 19th, 2011| News.

Microfinance in India

 Microfinance in India

Microfinance in India was initiated in the beginning of 1980 to provide access to savings and credit services. Since then microfinance sector has grown significantly. Small Industries Development Bank of India – SIDBI and National Bank for Agriculture and Rural Development – NABARD are devoting much effort to improve microfinance sector in India.

Microfinance is defined as small scale financial service for people of low-income groups who farm, fish or herd. Microfinance in India is slowly becoming popular with more and more people from local villages taking advantage of it. The loans are given to the poor people for investing in small businesses. This will help them to generate income enough for their families. The borrowers can earn money and pay back the loan. Poor people in rural areas may not have access to banking services. And the small amount of loans that the borrowers want is not given by banks because the administrative cost is high.

Many microfinance organizations prefer to give loans to poor women. Because they are deprived of educational opportunities. Women spend the money they earn for the well being of their family. They are also responsible than men in paying back the loan amount.

Microfinance in India 1

 In the 1980’s NABARD promoted self help groups and RBI has taken few decisions regarding microfinance which were followed by NABARD. The decisions were to allow banks to give loans to unregistered groups, to allow banks to give loans to groups without asking for purpose and also to lend money without asking for physical collateral. NABARD has started SHG-Bank Linkage program in 1992. Presently more than 42 lakh self help groups are linked with banks. More than 600 lakh people benefited from microfinance in India.

There are many benefits with microfinance in India. Microfinance is the small loans that are paid back with interest. It is good to note than 97% of the microfinance loans have been paid back. Poor people do not have anything to offer as collateral to get loans. Microfinance allows the poor to get loans earn money and pay back the loan. This helps for the financial independence and growth of rural poor people.

The most important benefit of microfinance in India is it creates long term independence in areas which are poverty stricken. Though it is good to donate clothes, money or other things to the poor, microfinance loans helps them to earn money without depending on others.

Microfinance in India cannot alone succeed in eradication of poverty. Proper care must be taken by the government to provide social, economic and political support to those who take microfinance loans to earn livelihood.

Microfinance in India is meant to help the poor in rural, semi-urban and urban areas in undertaking economic activities. There are many microfinance companies in India. These are playing an important role in the development of India. Microfinance companies in India are split into more than 3000 microfinance companies, NGOs and NGO-MFIs. Top seven microfinance companies in India are –

  • SKS Microfinance Limited: This is an NGO organization began in the year 1998. This organization offers loans to poor women to help them earn their livelihood.

  • Spandana Sphoorty Financial Limited: Spandana Spoorty financial limited offers credit services to low-income individuals to improve the quality of their life. Loan terms are explained to the clients completely and there are no hidden charges for the loans.

  • Share Micron Limited: This is a non-banking financial company which serves the lower income group and in particular the rural women. This organization helps the women to start small businesses so that they can come up in their life.

 

  • Asmitha Microfin Limited: Asmitha Microfin Limited offers workshops and training programmes to the low income groups apart from credit services to make them live life without any difficulty.

  • Shri Kshetra Dharmasthala Rural Development Project: This organization takes up many activities for rural development and microfinance is one of its services. Loans are given to landless laborers, small farmers etc.

  • Bandhan: Bandhan is one of the top 50 microfinance companies in the world and is second in India. Bandhan works towards reaching its main objectives which are women empowerment and poverty eradication.

  • Cashpor Micro Credit: Cashpor Micro Credit Company offers microfinance especially for people who lie below poverty line in Bihar and Uttar Pradesh.

Microfinance in India 2

Microfinance in India is most important as the villages are the backbone of India and microfinance can help improve the life of poor rural people in India and thereby ensures development of villages.

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