Microfinance is the provision of financial services, such as loans, savings, and insurance, to people who do not have access to traditional banking services. In India, microfinance has emerged as an important tool for poverty alleviation and financial inclusion. Here are some details about the delivery of microfinance in India:
- Microfinance institutions (MFIs): MFIs are the primary delivery channels for microfinance in India. There are two types of MFIs – regulated and non-regulated. Regulated MFIs are registered with the Reserve Bank of India (RBI) and are subject to prudential norms and regulations. Non-regulated MFIs are not registered with the RBI and are subject to fewer regulations.
- Self-help groups (SHGs): SHGs are another important delivery channel for microfinance in India. SHGs are groups of 10-20 people who pool their savings and lend to each other. SHGs are often promoted and supported by government agencies and NGOs. The National Bank for Agriculture and Rural Development (NABARD) is the nodal agency for promoting and financing SHGs in India.
- Business Correspondents (BCs): BCs are individuals or entities that act as intermediaries between the banks and the customers. BCs are authorized by the banks to provide basic banking services, including microfinance, to customers in remote areas.
- Technology-enabled delivery: Technology has played an important role in expanding the reach of microfinance in India. Mobile banking, biometric authentication, and digital lending platforms have made it easier and more cost-effective for MFIs to deliver financial services to customers in remote areas.
- Government schemes: The government of India has launched several schemes to promote financial inclusion and microfinance. These include the Pradhan Mantri Jan Dhan Yojana (PMJDY), which aims to provide banking services to every household in the country, and the National Rural Livelihoods Mission (NRLM), which aims to promote SHGs and provide livelihoods support to rural households.
- Regulatory framework: The microfinance sector in India is regulated by the RBI. The RBI has issued guidelines for MFIs and has set up a separate category of non-banking financial companies (NBFC-MFIs) for regulating the microfinance sector. MFIs are required to comply with the RBI’s regulations on interest rates, loan disbursement, and recovery practices.
In conclusion, the delivery of microfinance in India is primarily through MFIs, SHGs, and business correspondents. Technology-enabled delivery has also played an important role in expanding the reach of microfinance. The government of India has launched several schemes to promote financial inclusion and microfinance. The microfinance sector in India is regulated by the RBI, and MFIs are required to comply with the RBI’s regulations. Overall, microfinance has emerged as an important tool for poverty alleviation and financial inclusion in India.