Significant Features of Microfinance

Significant Features of Microfinance

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Microfinance Institutions are essential for a nation like India, where even greater than 80% of people work in the unorganised sector. Local banks are sometimes out of the question for small business owners due to the exorbitant costs. People can lack the documents required to open an account, like identity cards and proof of income. Another possibility is that they are unable to read and write clearly enough to finish the paperwork. This duty is carried out by microfinance, which also covers the gap. The economic growth of India is significantly influenced by microfinance. It acts as a preventative measure against poverty for people who live in rural areas. Its objective is to assist communities who are struggling financially in obtaining greater levels of wealth creation and income security for both people and entire communities. Access to financing for small business owners is the primary purpose of microfinance in India. Microfinance in India provides access to loans, insurance, and savings accounts, as was already mentioned.

The Microfinance Philosophy also places a strong emphasis on women by offering them loans. It acts as a weapon for the empowerment of low-income women because, as they become independent, they can directly better the lives of their families and combat any gender inequity that may exist. Women and low-income households in both urban and rural settings are the major targets of microfinance. The Reserve Bank of India does not place any limitations on the minimum and maximum lending amounts. Credit is essential for the poor to continue working and paying their bills.

Additionally, Microfinance institutions are crucial for the poor to invest in small-scale self-employment enterprises like marginal farms in order to generate income. They have restricted access to conventional banking channels because of resource limitations and the structure of official credit organisations. Microfinance institutions and self-help groups in India are influencing other traditional banking institutions as a result of serving the financial needs of the underprivileged. It has significantly improved the level of living for individuals who are living in poverty.

As a result, microfinance is not a financial system but rather a tool for eradicating poverty, bringing about social change, and, in particular, increasing the status of women in our country so that they can achieve economic independence. Microfinance fulfills a public need, making it an appropriate social policy goal.