Microfinance in India

The detailed look at country’s finance and banking sector and its regulation provides the context within which microfinance outlines its constraints and evolution. Developing a good knowledge about the commercialisation of microfinance and its impact on microfinance outreach in India, a clear understanding of India’s poverty, economy and growth is essential.  This section then focuses on the transformation of its financial sector in order to set the background within which to better scrutinize SHARE and BASIC.

India compromise one sixth of world’s population and which is about 1.1 billion in 2007. It is a key emerging market along with Brazil and China. Continues foreign investment gives the picture of growing GDP and creates an environment where wealth is rising for the nation. India being a populous country, its GDP ranks among the top 15 economies of the world. However, approximately 300 million people or about 60 million households are living below the poverty line and only about 20 percent estimated have access to credit from the formal sector. Additionally, the segment of the rural population above the poverty line does not have good access to the formal financial intermediary services, including savings services due to lack of interest shown by formal financial institutions.

“A group of micro-finance practitioners estimated the annualized credit usage of all poor families (rural and urban) at over Rs 45,000 crores, of which some 80 percent is met by informal sources. This figure has been extrapolated using the numbers of rural and urban poor households and their average annual credit usage (Rs 6000 and Rs 9000 pa respectively) assessed through various micro studies.” Microfinance is one development approach that can contribute to achieving the national and international goal of improving the livelihoods of those Indians that are not yet seeing the benefits of growth.