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Micro-Finance has been defined by RBI “as provision of thrift and credit and other financial services of very small amount to the poor in rural, semi urban and urban areas to improve their income and living standard”.

Micro-credit institutions are those which are engaged in providing credit and other facilities to these poor strata of the society. RBI has asked banks and financial institutions to formulate their own schemes, models, prescribe suitable criterions, choose suitable branches, credit norms and interest rates etc for this purpose. Accordingly, banks have to prepare micro-credit plans for blocks, districts and the whole state for this purpose and these plans are reviewed at State and National level.

The non-governmental organizations (NGOs), voluntary organization and self help groups are playing critical role in providing micro-finance facilities. Even NABARD is playing active role in supporting these organizations and even arranging financial assistance to them. Many states have also launched various schemes of micro-finance for increasing income of poorest of the poor in rural, semi urban and urban areas.


Micro-Finance products

1. Micro credit
2. Micro savings
3. Micro insurance
4. Micro leasing
5. Micro Money Transfer


Participants in Micro finance

– Financial institutions
– Donors
– Private equity
– Micro-finance institutions
– Self help groups
– Non-Government organizations (NGO‟s)


In India SHG‟s are playing key role in the field of Micro-finance with key objective like-

– To create habit of savings
– To secure financial technical and moral strength
– To avail loan from financial institutions
– To gain economic prosperity through loan/credit
– To save them from exploitation by money lenders.

Millennium Development Goals of Micro-finance

– Eradiate extreme powerty and hunger
– Universal primary education
– Women empowerment
– Reduce child mortality
– Control HIV/AIDS, Malaria etc.


The last two decades has seen the microfinance industry grow by leaps and bounds around the world. India is no exception, the number of non banking finance companies providing credit and savings products has gone from a few dozens to several hundreds. It is estimated by Sa-Dhan, a self regulatory organization that the total number of microfinance clients in India touched the figure of 30 million in mid 2017. This figure does not include the clients serviced by six micro-finance companies that have been given a banking license by the Reserve Bank Of India.

Demonetization, an ill conceived act of financial terrorism failed to deter the spirit of MFI’s, entrepreneurs and borrowers who continued to repay micro-loans albeit with minor hiccups in the repayment schedule. There was also some contraction in loan portfolio’s observed as demonetization hurt the poor the most and capital formation indicators turned negative.

Going forward it is important to collect and study empirical data from the industry to ensure that microfinance companies continues to strengthen the financial inclusion agenda in India. To enable this, Sa-Dhan has released the latest version of it’s Bharat Microfinance Report 2017. The data and figures from this report can be used until September 2018 when the next version will be released.

Notable Highlights from the report are as follows:

  • Microfinance companies have operations in 29 states, 4 UT’s and 563 districts of India.
  • The loan outstanding for FY17 grew by 26% compared to FY16.
  • The total outstanding loan portfolio of Indian microfinance companies stood roughly at Rs 47,000 Crores.
  • The average loan outstanding per borrower stands at Rs 12,500.
  • Women borrowers account for 96% of the borrowers.
  • The microfinance sector employs close to 90,000 personnel. Field staff comprise 60% of this workforce.
  • The proportion of urban clients has shown a decreasing trend.
  • SC / ST borrowers constitute 20% of borrowers followed by minorities at 10%
  • SHG’s increased during the year and and the number of families linked to the SHG-BL program crossed 112 million.
  • The loan portfolio outstanding of SHG’s stands at Rs 61,500 Crore.
  • The NPA’s of SHG’s stand at 6.5% which is a cause for concern.


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