Microfinance-strengthening the vertebrae of India

Introduction:  Microfinance is the type of financial service to low-income clients which majorly include consumers who are traditionally non bankable.
The reason as to why microfinance found its existence is the fact that the world has a major section of its population who are poor or nearly poor and are deprived of financial aid. Microfinance is not just providing credit to the needy people but it also encompasses a varied range of services which includes insurance, savings, investment, fund transfer, etc. The scope of microfnanace is not only limited upto financial service. Though it primarily features financial products, it also empowers the people with necessary information and technical assistance.

         The major goal that rests at the hands of microfinance institution is eradication of poverty thereby giving an opportunity to the poor people to live a decent life and reducing the uncertainties related malnourishment, hygiene, sanitation and above all reducing dependency.

Statement of the problem: India is home to 1.18 billion people. According to Multidimensional Poverty Index (MPI)  jointly developed by Oxford Poverty and Human Development Initiative and United Nation Development Program (UNDP) published on, 55% of India’s 1.18 billion population or 649 million people are living in poverty. Further, India accommodates one third of the world’s poor population.

         The view of the problem is twofold:-

i)                   Socialistic View: “every man is born equal...” As every man is born equal, he must have equal right to live decent life. The unequal distribution of wealth has led the rich to become richer while the poor continues to become poorer. In this situation, microfinance will empower this deprived section of our society to improve their standard of living and get access to proper medication, insurance, sanitation, etc.

ii)                Opportunistic View: As India has major of its population living in poverty, there is abundance of opportunities to explore with respect to microfinance. Firstly the rural India constitutes 60% of its population and with the food inflation rate at 16.37% ( on 20-oct-2010) and the WPI at 9.41%, the poor people finds it extremely difficult to match their ends. Further, the urban population is also not immune to impact of the inflation. These figures suggest that people would need more sources of funds to face the rising price of necessary goods. Microfinance can help these people to make their ends meet.

Objective of the study:

a)   Socialistic view: to empower the needy people with resources so that they are not deprived of their basic necessity, give them a source of income to reduce dependability and in the process boost the nations GDP.

 Opportunistic View: to provide indebt insight for new as well as existing microfinance institutions on the prospects of reaching out to the poor and in this endeavour, leverage its brand’s by attaching to a social cause and above all increase its profitability.