Growth of Micro Credit
GROWTH OF MICRO-CREDIT IN INDIA: AN EVALUATION (90th
Conference volume of Indian Economic Association
2007
Dr. Md. Tarique * & Ranjan Kumar Thakur †
The success of Grameen Bank in Bangladesh has established the fact and several literatures in this regard also acknowledge the fact that poor are bankable in terms of capacity to save and repay the loans provided the same are collected at the doorstep in small amount at frequent intervals. This is the basic principle of micro-finance, which suits the mindset, and capacity of the poor. There are two major models under microfinance, i.e., Self-Help Group (SHG)-Bank Linkages and Micro-Finance
Institutions (MFI) - Bank Linkages being operated in the country. SHGs are the real grass root level setups for micro-credit growth. They reach the poorest sections in rural settings as well as are empowering lakhs of women and entrepreneurs all around India.
Although the growth of SHGs in India has been phenomenal there are some significant problems faced by them which might hamper their growth in the coming years. For instance politicizing of subsidy allotment among SHGs has become a big problem. With some efforts substantial progress can be made in taking MFIs to the next orbit of significance and sustainability. This needs innovative and forward-looking policies, based on the ground realities of successful MFIs. This, combined with a commercial approach from the MFIs in making Micro Finance Financially Sustainable, will make this Sector vibrant and help achieve its single-minded mission of providing Financial
Services to the Rural Poor.
I. INTRODUCTION
"If you can run a bank, lend money, and get it back, cover all your costs, and make a profit, and people get out of poverty, what else do you want?"
Mohammad Yunus, micro-credit pioneer and founder of the Grameen Bank.
India has 400 million people who qualify to being very poor, living on less than $1 per day. The Reserve Bank of India (RBI) and the
Conference volume of Indian Economic Association
2007
Dr. Md. Tarique * & Ranjan Kumar Thakur †
The success of Grameen Bank in Bangladesh has established the fact and several literatures in this regard also acknowledge the fact that poor are bankable in terms of capacity to save and repay the loans provided the same are collected at the doorstep in small amount at frequent intervals. This is the basic principle of micro-finance, which suits the mindset, and capacity of the poor. There are two major models under microfinance, i.e., Self-Help Group (SHG)-Bank Linkages and Micro-Finance
Institutions (MFI) - Bank Linkages being operated in the country. SHGs are the real grass root level setups for micro-credit growth. They reach the poorest sections in rural settings as well as are empowering lakhs of women and entrepreneurs all around India.
Although the growth of SHGs in India has been phenomenal there are some significant problems faced by them which might hamper their growth in the coming years. For instance politicizing of subsidy allotment among SHGs has become a big problem. With some efforts substantial progress can be made in taking MFIs to the next orbit of significance and sustainability. This needs innovative and forward-looking policies, based on the ground realities of successful MFIs. This, combined with a commercial approach from the MFIs in making Micro Finance Financially Sustainable, will make this Sector vibrant and help achieve its single-minded mission of providing Financial
Services to the Rural Poor.
I. INTRODUCTION
"If you can run a bank, lend money, and get it back, cover all your costs, and make a profit, and people get out of poverty, what else do you want?"
Mohammad Yunus, micro-credit pioneer and founder of the Grameen Bank.
India has 400 million people who qualify to being very poor, living on less than $1 per day. The Reserve Bank of India (RBI) and the
References: i Economic and Political Weekly, “Microfinance: Productive Linkages,” March 6, 2004: at the Micro- Finance Conference organised by the Indian School of Business, Hyderabad on August 6, 2005. vii Micro finance in India: Sectoral issues and challenges(Nov.2004): Y.S.P