Micro-finance (MF) is a small-scale financial intermediation, inclusive of savings, credit, insurance, business services and technical support provided to the needy borrower.
Evolution of Micro-Finance
The formal existence of MF was found in 1972. A charity based model (interest free loans where repayment was based on peer pressure) of MF was evolved in Ireland. Bangladesh Grameen model is based on the principle of trust and creditworthiness of poor with both, obligatory and voluntary saving schemes.
MF has become a movement in India. Simultaneously it has become a unique tool of empowerment and capability enhancement in the following ways:
- It has added millions of people to the banking system by developing the habit of thrift and saving.
- It helps in poverty alleviation.
- It encourages group and individual activities which provide livelihood on a regular basis.
- Through MF, financial inclusion is possible with the common effort of Bank, NGO’s, Micro-Finance Institutions and other institutions.
- It empowers women by making women not only economically, but socially and politically as well.
As of now micro finance institutions are regulated like a Non-Banking Financial Institution by RBI. Further, new institutions like payments bank, small finance bank, local area bank etc. have been launched. Rashtriya Mahila Kosh (RMK) established in 1993 as a national level autonomous organization under the aegis of the Ministry of Women and Child Development extends micro-finance to the poorest and asset-less women entrepreneurs.
In the Union Budget 2015-16, government sponsored micro insurance and pension were launched for the disadvantaged sections of the society.