Emergence and Growth of Micro Finance Sector in India: With Special Reference to Finance for Micro Enterprises

Abstract

This concept paper is based on the premise that after fifty years of independence our achievements in the development sector are only moderate. Unemployment and poverty still pose major challenges for us, especially in rural areas. It is because of the reason that credit needs of the rural poor to start micro enterprises could not be met out by the institutional initiatives of rural finance. It all happened irrespective of the high opportunities of employment generation lies in agriculture sector and rural non-farm sector (RNFS). Due to the failure of percolation theory of social development, poor people were highly dependent on non-institutional sources of credit. Growth of micro finance in India is not spontaneous. It is in response to the failure of institutional initiatives in rural finance and exploitation attached with non-institutional system of credit. By getting a suite from Grameen Bank of Bangladesh, non-government organisations (NGOs) in India acted very promptly for the growth of micro finance sector as it provides space to the poor people to use their own savings for credit linkages and finally starting the viable micro enterprises. At present there are about 500 micro finance institutions (MFls) in India showing a path of social development:' Though these MFls are adopting different approaches of micro finance delivery but all the approaches leads in developing micro enterprises for the people. Role of apex financial institutions (AFls) has been very supportive for the growth of micro finance sector in India. The sector is still in its young age in India. It has to be nurtured properly to make it grow and sustained. It has posed some challenges in the contexts of liberalisation. These challenges are to be faced very attentively to make the sector people oriented and sustainable.