Paper

Microfinance in India: A Critique

Growth of microfinance in India
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This paper traces the growth of microfinance to its present status in India. The first section maps the evolution of microfinance in the Indian context and the government efforts such as the priority sector lending and other developmental programs that have promoted its growth.

The document then examines different aspects of the microfinance including:

  • Operation of a microfinance institution (MFIs);
  • Formation of self help group (SHG);
  • Joint liability group mechanism;
  • Participation and empowerment of women.

The paper further discusses:

  • The financing of SHGs' linkage with the formal banking system;
  • Legal forms of MFIs in India;
  • The contribution of the different segments of financial institutions to the SHG movement;
  • The sustainability of the movement.

The paper explores data from different studies and comments on the sustainability of majority of the microfinance institutions/programs.

It presents a discussion on the issues such as:

  • Transformational issues that non-regulated entities face when they carry out financial operations;
  • Volume of credit available to enhance economic growth;
  • Need for micro-insurance.

The paper concludes with the reiteration that microfinance needs greater integration with the formal financial systems and needs to be supported with concurrent development efforts in rural infrastructure and economy.

About this Publication

By Ghosh, R.
Published