EVOLUTION AND EMERGING ROLE OF MFIs IN INDIAN MICRO FINANCE SECTOR

Abstract

The policy makers in the post liberalization foreseeing the unequal income distributions which will widen the gap between the haves class and have-nots class in the society, took a different path than that of the earlier mechanisms to bridge the gap in the society in India. Obviously the government needs to extend various basic amenities and to support the underprivileged. One of the most important of the policies is to address the issues that the financially excluded population and intricacies government would face due to exclusion; and thus devised extension of banking and financial services through Microfinance to cater to the excluded. Accordingly, the policy initiatives on financial inclusion, a holistic approach initiating multiple services like providing insurance, payments and remittances, besides enabling financial discipline through saving and extending support to have income-generating activities to unbanked rural segment was made possible. In this backdrop, this paper makes an attempt to identify the significance and major initiatives taken for growth of Microfinance in India, how it facilitated the financially excluded with services, how the ecosystem and framework of MFIs is supporting the cause and the important challenges that MFIs faced are elaborated.