In order to understand the microfinance scenario in the country one must understand what exactly is microfinance?
Micro finance as the name suggests is providing financial support to upcoming entrepreneurs and small time enterprise who on their own financial strength would not qualify for obtaining loans from the traditional financial system .Think of a homemaker who desires to supplement her family income by making and selling pickles .She too requires financial assistance to procure the raw materials and the spices to make the pickle finally she also requires to purchase the bottle and packing for the same no bank will provide her the loan for this tiny venture.
Now, suppose there are ten such lady entrepreneur in the locality who have such similar small ventures up their sleeves they can collectively make a group which is technically known as self-help group when this SHG approaches the banks for finance the bank seem to be very happy to do so.
But,what has now happened the individual risk faced by the bank is now converted to a collective risk and hence the banks have fewer problems lending to these SHG enterprises each SHG member commits to pay the EMI even if one or more member find it difficult to do so due to market fluctuation thus the members of the SHG help in during the difficult times and as a result it is found that the success rate of these tiny enterprises goes up dramatically there is also a strong peer pressure to pay off the EMI on time and therefore it is also found that the default rate is very low in the SHG paradigm hence the banks have found Microfinance as a very effective and economical means of funding these small enterprises the banks have some statutory obligation to earmark certain proportion of their loan portfolio towards priority sector lending and micro finance is now a magic mantra .
“My Dream is to see Microfinance percolate within the country “
-Naina Lal Kidwai
Our country is indeed in a strong need to percolate micro finance for microfinance is the only medium for an easy access to financial inclusion for those who more or less need it the most in the country .Think about it is only due to microfinance that these SHG have a medium of primarily starting up a venture and also instill a feeling of self-sufficiency among them .Not only that if microfinance does manage to reach the unreached within the country poverty will be a long-lost story that is best forgotten making it a major step towards a change in being a developed country that is developed India ..A future present for a new tomorrow within the country.
– Khyati Kotiyan
good article