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Microfinance in Developing Economies

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Microfinance is a provision of microloans or credits to poor entrepreneurs and small businesses lacking access to banking and related services. Microfinance has emerged as a large movement, its object is to everyone in the world, especially the poor and socially marginalized people and households have access to a wide range of affordable. It includes not only just credit but also savings, insurance, payment services and fund transfers. Many of the people who promote microfinance generally believe that such service will help poor people out of poverty. Microfinance is one of the ways to promote economic development, employment and growth through the support of micro-entrepreneurs and small businesses.

Microfinance is a category of the services which includes microcredit. Microcredit id provision of credit services to poor clients. Microfinance is defined as financial services such as savings accounts, insurance funds and credit provided to poor and low-income clients. So that, it helps them to increase their income level, that results in improving their standard of living.

In developing economies and especially in the rural region. The NABARD looked at the several models for offering financial services to the unbanked particularly for the women and decided to experiment a very different model. Now it is popularly known as Self-Help Groups. A small group of women and men are forming their own little mini bank.

Marguerite Robinson describes in The Micro Finance Revolution, the 1980s demonstrated that “microfinance would provide large-scale outreach profit.” And in the 1990s, “the microfinance began to develop as an industry”. In the 2000s, “the microfinance industry’s objective is to satisfy the demand on a much larger scale and to play a vital role in reducing poverty. Microcredit institutions must fund their loans through savings account that help poor people manage their myriad risks.

Banks are providing loans to the poor people but it has lot of limitations like security and high operating costs. So, microfinance has developed as an alternative to providing loans to the poor people with the goal of creating financial inclusion and equality.

Ela Bhatt had initiated women’s own SEWA cooperative bank in 1974 in Ahmedabad. Gujarat. A Nobel prize winner Muhammad Yunus had introduced the concept of Micro-Credit in Bangladesh in the form of the “Grameen Bank”. The National Bank of Agriculture and Rural Development (NABARD) it looks at some models which are offering financial services to the unbanked. Especially for the women. Now popularly it is known as Self-Help Groups(SHG)

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Microfinance in Developing Economies. (2018, December 17). GradesFixer. Retrieved February 27, 2021, from https://gradesfixer.com/free-essay-examples/microfinance-in-developing-economies/
“Microfinance in Developing Economies.” GradesFixer, 17 Dec. 2018, gradesfixer.com/free-essay-examples/microfinance-in-developing-economies/
Microfinance in Developing Economies. [online]. Available at: <https://gradesfixer.com/free-essay-examples/microfinance-in-developing-economies/> [Accessed 27 Feb. 2021].
Microfinance in Developing Economies [Internet]. GradesFixer. 2018 Dec 17 [cited 2021 Feb 27]. Available from: https://gradesfixer.com/free-essay-examples/microfinance-in-developing-economies/
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