Microfinance and Strategy of Financial Inclusion in India

Avnesh Kumar Gupta


The main aim of this paper is to evaluate the role of microfinance for empowering the people and realization of government’s policy of financial inclusion in India. However, there are certain concerns about the efficiency of Microfinance Institutions in handling public money, their targeted growth, achievement of policy goals and demand and supply management of funds. Today, the Microfinance Institutions demand the government to empower them for mobilizing public savings. With increasing demand for rural finance, and the inadequacies of formal sources of finance, the Microfinance Institutions have immense opportunities in the new incarnation of micro credit in India. However, in the light of recent experiences, and the need for qualitative economic growth, we suggest that Microfinance Institutions should be managed with better scrutiny in terms of finance and technology as well as social responsibility. This is to be of utmost importance in order to upgrade Microfinance Institutions from thrift and credit institutions to capacity-generating and livelihood- managing groups of people. Non Governmental Organizations have played a commendable role in promoting Self Help Groups by linking them with banks. There is, therefore, a need to evolve an incentive based package which should motivate these NGOs to diversify themselves into other backward areas.

Keywords: Microfinance, Financial Inclusion, Self Help Groups, Institutional Credit

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