An Overview of Microfinance Activity towards Financial System in India

Examining the Impact of Microfinance on Poverty Alleviation in India

Abstract

Microfinance is the provision of financial services to low income clients or solidarity lending groups including consumers and the self-employed, who traditionally lack access to banking and related services .Microfinance is not just about giving micro credit to the poor rather it is an economic development tool whose objective is to assist poor to work their way out of poverty. It covers a wide range of services like credit, savings, insurance, remittance and also non-financial services like training, counselling etc. Microcredit emphasizes the provision of credit services to low income clients, usually in the form of small loans for micro enterprise and income generating activities. Use of the term microcredit ‘is often associated with an inadequate amount of the value of savings for the poor. In most cases, the provision of savings services in microcredit ‘schemes simply involve the collection of compulsory deposit amounts that are designed only to collateralize those loans. Additional voluntary savings may collect but the clients have restricted access to their enforced savings. These savings become the main source of capital in the financial institutions.