Importance Of Microfinance

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Introduction “If you are uplifting the poor, you are uplifting the nation”- M.K.Gandhi This statement clearly explains the essence of microfinance and its importance in the modern economy. Microfinance is a source of financial services and resources to the small entrepreneurs, villagers and less privileged section of the society. In December 2007, Forbes has brought out a special magazine on microfinance and has described microfinance as the next buzzword. Global Context and History The concept of microfinance is not something new. In fact, the history of the microfinance goes back as early as the 15th century. It was in Europe where the concept of pawn shops – an institution by the Catholic Church against the people who were charging exorbitant…show more content…
It also helps to generate more employment. • Empowerment of women- almost 50 % of the Self Help Groups are formed by women. It gives the women a greater economic security. They can run their own small micro-businesses at home earning money for them and their family. • Economic growth- Finance plays a pivotal role in stimulating sustainable economic growth. Due to microfinance, production of goods and services increases with increasing GDP and in the same contributing to the economic growth of the country. • Mobilisation of savings- It promotes saving habits among the people. Now everyone in the country can bank and save money. The financial resources generated through savings and micro credit obtained from the banks are utilised to provide loans and advances to the members. Thus microfinance helps in the mobilisation of savings. • Development of skills- Micro financing has become a boon to the potential rural entrepreneurs. SHGs encourage the members to set up business units individually or jointly. They receive training from the supporting institutions and learn leadership qualities. Hence micro finance is indirectly responsible for the development of…show more content…
In India, this type of delivery model is very popular in the corporate world. Growth in the sector Fig- Crisil report The Indian microfinance sector has been rated one of the fastest growing sectors in the whole world. According to the statistics of 2009, there are around 1000 microfinance institutions in India. MFIs have been able to reach 234 of the total 331 poorest districts which have been indentified by the government. According to the present trend, lending to the economically actively poor both rural and urban has been pegged at around 7000 crore in the Indian Banks credit outstanding. Micro-Financial Sector Bill The Narendra Modi government has proposed to dilute the micro financial bill , 2012 which was introduced by Congress led UPA government. The new version of the Bill that is being currently worked on is quite unlikely to override the existing state government legislations like the earlier version proposed. The Microfinance Institutions Bill, 2012, envisaged as an overarching legislative framework that would have taken microfinance institutions outside the purview of state

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