Current Scenario of Micro - financing in India

With 75 million poor households potentially requiring financial services, the microfinance market in India is among the largest in the world. Estimates of household credit demand vary from a minimum of Rs. 2,000 to Rs. 6,000 in rural areas and Rs. 9,000 in urban settings. Given that 80 percent of poor households are located in rural areas, total credit demand ranges between Rs. 255 billion and Rs. 500 billion. However, only Rs.18 billion of this amount has been generated so far. The reason for this is that major portion for rural crediting has been from the informal sector and this is at a very high interest rate, thus reducing the volumes of such credits, and by far has been for investment purposes (13%) and more for family emergencies (29%) and social expenditures (19%).

There are a number of factors why rural crediting by the formal sector has not taken pace so far.