Microfinance: Notes
Unit 1: Microfinance
Level of Knowledge: Conceptual and Basic
1. Microfinance - Meaning, Definition, and Conceptual Framework
- Microfinance refers to the provision of financial services to low-income individuals or groups who
are typically excluded from traditional banking.
- It includes a range of services like microcredit, microsavings, microinsurance, and remittances.
- History: The concept originated in the 1970s with initiatives like the Grameen Bank in
Bangladesh by Muhammad Yunus.
2. Models of Microfinance
- Joint Liability Group (JLG) Model: Small groups of individuals are jointly liable for loans.
- Self-Help Group (SHG) Model: A group of individuals comes together for savings and borrowing.
- Cooperative Model: Members form a cooperative to manage financial services.
3. Microcredit Vs Microsavings Vs Microfinance
- Microcredit: Small loans given to the poor for self-employment and income generation.
- Microsavings: Small savings accounts for low-income individuals, encouraging saving habits.
- Microfinance: Encompasses microcredit, microsavings, and other financial services for the poor.
4. Microfinance Institutions (MFIs)
- MFIs provide microfinance services. They can be NGOs, cooperatives, or non-bank financial
institutions.
- Development in India: Initiatives by GOI, RBI, MFDF, and NABARD have played a crucial role.
5. Development of Microfinance in India
- Government Initiatives: Various schemes and policies to promote microfinance.
- RBI and NABARD: Regulatory frameworks and financial support.
6. Innovative Microfinance Models in India
- SHG-Bank Linkage Programme (SBLP): SHGs are linked with banks for loans.
- Microfinance Plus: Combines financial services with other services like education and healthcare.
7. Issues Faced by Microfinance in India
- High-interest rates, over-indebtedness, lack of financial literacy, and regulatory challenges.
8. Micro Delivery Mechanism
- Various channels through which microfinance services are delivered to the end-users.
9. Case Study of SKS MFI and Grameen Bank
- SKS MFI: One of the largest MFIs in India, known for its scale and outreach.
- Grameen Bank: Founded by Muhammad Yunus, a pioneering model in microfinance.
10. NGO and SHG
- NGOs and SHGs play a critical role in the microfinance sector, especially in rural areas.
11. Y.H. Malegam Committee Report on Microfinance
- The report addressed issues like interest rate caps, transparency, and over-indebtedness in the
microfinance sector.
12. Microfinance and Poverty
- Microfinance as a tool for poverty alleviation, though its impact has been debated.
13. Microfinance and Economic Development
- Contribution of microfinance to economic growth by fostering entrepreneurship and small
businesses.
14. Microfinance and Rural Development
- Microfinance's role in promoting rural livelihoods and development.
15. Microfinance and Women Empowerment
- Empowering women through financial independence and decision-making power.
16. Microfinance and Informal Finance Sector
- Relationship between microfinance and informal financial practices in rural areas.
17. Microfinance and Small Business Development
- Supporting small businesses through microcredit and other financial services.
