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Day 21 – Q 1.Micro finance has the ability to unleash rural India’s entrepreneurial zeal. Comment. Have micro finance institutions developed to their true potential? Examine.

1. Micro finance has the ability to unleash rural India’s entrepreneurial zeal. Comment. Have micro finance institutions developed to their true potential? Examine. 

सूक्ष्म-वित्त में भारत के उद्यमशील उत्साह को उड़ान देने की क्षमता है। टिप्पणी करें। क्या भारत में सूक्ष्म वित्त संस्थानों को अपनी वास्तविक क्षमता के लिए विकसित किया गया है? जांच करें।


Microfinance refers to providing financial services to unemployed, low income people to start small ventures and improve their livelihood. Services include micro loans, saving insurance, remittances.


Creating jobs is essential for India’s socio-economic development. With issues of underemployment and overemployment in agriculture, increasing automation in manufacturing sector Government is banking on entrepreneurship to create jobs for rural masses. There are large number of products and services in rural areas which can be leveraged to set up small and micro enterprises.


1) Cottage and Handicraft industry – pot making, clay folks, basket making;

2) poultry industry – fastest growing industry in India.

3)micro food processing units – horticulture, animal husbandry, fisheries and marine products.

However, most population living in rural area being small and marginal farmers, landless labours, rural artisans have low access to institutional credit. In such a scenario, micro finance institutions providing micro loans to lower income groups without collateral have ability to unleash rural India’s entrepreneurial zeal.

Tracing from SEWA in Gujarat, NABARD initiated program of linking SHG’s with banks, Setting of Regional Rural Banks, micro finance institutions have come long way in India. Some of the challenges that MFI’s faced in India were

  • Over-indebtedness: dealing with poor without collateral
  • Lack of risk management framework
  • Issue of multiple borrowing ex: Andhra Pradesh crisis 2010
  • Higher interest rates

Y.H.Malegam committee on MFI’s was constituted in 2010 which recommended  capping and transparency in interest rates, Classification of NBFC as NBFC-MFI  and others.

Recently, microfinance industry has seen growth over the past five years, growing at a 45% CAGR. It has witnessed rapid evolution with regulatory reforms post the Andhra Pradesh crisis in 2010 to regulate product, pricing and protection of customer interest. This included the growth of regulated NBFC MFIs – a special class of RBI regulated entities carrying out microfinance, the formation of the first ever Self-Regulatory Organizations (SROs) of the RBI.


Owing to the increase in the economic development and growing Gross Domestic Product (GDP) of India, there is an increasing demand for financial assistance, especially in microfinance. Various schemes introduced by the present government like Micro Units Development and Refinance Agency (MUDRA) bank and Jan Dhan Yojna has aided in the growth of the micro finance institutions.

Best answer:  Silent voice

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