The Microfinance Guarantee for Financial Inclusion: Evidence to Support in India

Abstract

In this paper ,Finance is one of the useful  tools in dispersal of economic opportunities. Timely finance helps both the entrepreneur or producer  as well as consumers in raising their welfare position. The increasing gap between demand and supply of financial services has led to bridge a gap between a  large number of rural population from formal financial institutions in india . As a response to the failure of formal financial institutions in reaching the poor, the ‘micro credit’ or more broadly ‘microfinance’ approach was come and institutionalized in the Indian rural credit system.The main aim was overcome the double problems of formal credit system - non-availability of credits to the poor and bad recovery performance of the existing rural credit institutions. As a result, Microfinance Institutions (MFIs) have come into the rural areas to improve and extend timely, easy and adequate access to financial services. In this context, the present paper discussed  the new institutions that emerged in the Indian financial system to include the excluded large number of rural population from formal financial institutions in india. The SHG-bank linkage and MFI models are the two important  microfinance approaches in the post-financial reforms in India. The paper  also finds that the microfinance sector in India is growing with the origins of new institutions on the one hand and, on the other hand, the NGOs are themselves into financial institutions and entering the business of microfinance. The paper concludes that the suitable laws and regulations to control the microfinance business in India.