Impact Of Microfinance On Rural Development

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Microfinance, a concept introduced by Nobel laureate Mohammed Yunus in Bangladesh, has proved to be one of the most remarkable tools to eradicate poverty and bring about development in rural areas of a country. Its success has led to it being replicated in many developing countries all over the world. Developing economies have recognized the importance of bringing about economic development in rural areas in achieving strong economic and inclusive growth. In this essay, we seek to understand microfinance and its impact on rural development in India. As the term indicates, Microfinance is the provision of small loans (or to use a broader term – financial services) to low income individuals, groups and self-employed who are usually found to be lacking in access to traditional banking services (i.e. of commercial banks). Over the years, the term has not only evolved to include small credit but also bringing about economic development by offering traditional banking services such as savings, deposits, insurance, etc. Some of its features includes the small size of loans, the low income of borrowers, shorter duration of loans but high interest rates and the absence of collateral as an eligibility. The main aims of microfinance are to help poor people start some form of business, establish their livelihoods and in general improve their standards of living. Women have been identified as not only the most vulnerable section of the rural populace but also as the section which has

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