Role of microfinance in poverty alleviation in India

Abstract

Low-income individuals, such as those living in rural poverty, low-income customers, and small business owners with little capital for operations, can receive financial assistance via microfinance. In this system, microfinance offers financial support to people who find it difficult to receive financial aid, enabling them to expand their businesses. Numerous financial services are offered by them, including loans, deposits, savings accounts, money transfers, insurance, etc. The number of SHGs with savings was found100.14, 102.43, 112.23, and 118.93 lakhs during 2018-19, 2019-20, 2020-21, 2021-22, respectively. Number of SHGs with loan outstanding varied from 46.73 to 67.40 lakh during 2015-16 to 2021-22 respectively. In India and other developing nations, micro-finance is widely recognized as a tool for reducing poverty. Small businesses like banks, NBFCs, Section 25 firms, various cooperatives, NGOs, and MFIs are all targeting rural markets, making microfinance in India today potentially a dynamic market with many players selling various goods and services to the poor and low-income people. Microfinance is a specific type of financing intended to assist those in need and a segment of society living in impoverished areas who desire to stand on their own feet. By using a single-factor ANOVA, we can see the sector-specific distribution of bank loans given to SHGs during the last seven years. This essay tries to understand the significance of microfinance in reducing poverty in India, as well as its primary models and difficulties.