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Microfinance

Dr. P.K. Biswas

Institute for Financial


Management & Research
Email: pkb@ifmr.ac.in
Mobile No. 09818677442
Definition of Microfinance
 “Microfinance encompasses the management of
small amounts of money through a range of
products and a system of intermediary functions
that circulates money in an economy. Microfinance
is small in value amount targeted at low income
clients. It includes loans, savings, insurance,
transfer services and other financial products and
services. Providers of microfinance include non-
government organizations (NGOs), self-help groups,
cooperatives, credit unions, commercial and state
banks, insurance and credit card companies, wire
services, post officers and other points of sale”.
Definition of Microfinance

 “Microfinance means providing very poor families


with very small loans to help them engage in
productive activities or grow their tiny business.
Over the time, microfinance has come to include a
broader range of services (credit, savings,
insurance, etc.) as we have come to realize that
the poor and very poor who lack access to
traditional formal financial institutions required a
variety of financial products”.
Important Points to Remember
 Microfinance is a package of broad range of financial
services and products such as savings, credit,
insurance and remittance, etc. for the poor
 An appropriate legal framework and effective
supervision have been the two crucial factors in the
evolution of local financial microfinance institutions in
Europe
 Microcredit came into prominence in the 1980s,
although early experiments date back to 1720 in
Ireland, 1800 in Germany, USA and a few other
countries.
 The concept of the ‘SHG-Bank linkage’ in India is
primarily based upon the fundamental principles of
RESCA
Important Points to Remember
 Poverty alleviation and economic development are
both interrelated; there is no sustainable poverty
alleviation without economic development
 In India NABARD has developed its own
microfinance methodology called “SHG bank-linkage
programme” which has proved very successful
 South Asia is seen as the birthplace of modern
microfinance, houses the larges microfinance
institutions in the world, in terms of outreach and
poverty focus