Growth of Micro Credit

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GROWTH OF MICRO-CREDIT IN INDIA: AN EVALUATION (90th
Conference volume of Indian Economic Association

2007 

Dr. Md. Tarique * & Ranjan Kumar Thakur †
The success of Grameen Bank in Bangladesh has established the fact and several literatures in this regard also acknowledge the fact that poor are bankable in terms of capacity to save and repay the loans provided the same are collected at the doorstep in small amount at frequent intervals. This is the basic principle of micro-finance, which suits the mindset, and capacity of the poor. There are two major models under microfinance, i.e., Self-Help Group (SHG)-Bank Linkages and Micro-Finance Institutions (MFI) - Bank Linkages being operated in the country. SHGs are the real grass root level setups for micro-credit growth. They reach the poorest sections in rural settings as well as are empowering lakhs of women and entrepreneurs all around India. Although the growth of SHGs in India has been phenomenal there are some significant problems faced by them which might hamper their growth in the coming years. For instance politicizing of subsidy allotment among SHGs has become a big problem. With some efforts substantial progress can be made in taking MFIs to the next orbit of significance and sustainability. This needs innovative and forward-looking policies, based on the ground realities of successful MFIs. This, combined with a commercial approach from the MFIs in making Micro Finance Financially Sustainable, will make this Sector vibrant and help achieve its single-minded mission of providing Financial Services to the Rural Poor.

I. INTRODUCTION
"If you can run a bank, lend money, and get it back, cover all your costs, and make a profit, and people get out of poverty, what else do you want?" Mohammad Yunus, micro-credit pioneer and founder of the Grameen Bank. India has 400 million people who qualify to being very poor, living on less than $1 per day. The Reserve Bank of India (RBI) and the Government of India are acutely conscious of the need to reach bank credit to this section of society, especially in rural India. Microfinancing is an enormous step in this direction. Micro-finance is the provision of a broad range of financial services such as deposits, loans, payment services, money transfers, and insurance to poor and low-income households and, their micro-enterprises. (ADB, Financial Services for the Poor, 2005). It is basically lending small sums of money without collateral, to the poor, who have an entrepreneurial spirit. Microfinance is a *



Lecturer, University Deptt. Of Economics, B.R.A.Bihar University, Muzaffarpur. Research Scholar, University Deptt. Of Economics, B.R.A.Bihar University,

Muzaffarpur.

512

GROWTH OF MICRO-CREDIT IN INDIA: AN EVALUATION (90th
Conference volume of Indian Economic Association

2007 

bottom-up approach to spread credit among the poorest population whether rural or urban.
According to a recent report of the RBI, banks and co-operative institutions made serious efforts in meeting the needs and demands of the rural sector. As a result, the outreach of Indian banking system has seen rapid growth in rural areas. In so far as all the Scheduled Commercial Banks (SCBs) including RRBs are concerned, 48 percent of their total branches (32,303 branches which translates to a population of about 23,000 per branch), 31 percent (13.67 crore) of their deposit accounts and 43 percent (2.55 crore) of their borrower accounts are in the rural areas. Such an unprecedented expansion of the formal financial infrastructure has reduced the dependence of the rural populace on the informal money lending sector from 68.3 percent in 1971 to 36 percent in 1991. (All India Debt and Investment Survey, 1991).

The success of Grameen Bank in Bangladesh has established the fact and several literatures in this regard also acknowledge the fact that poor are bankable in terms of capacity to save and repay the loans provided the same are...
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