Page - 4

Previous

On the other hand, informal credits have been attractive albeit high interest rates due to:

Meeting the Demands

Inadequacies in rural access to formal finance and the seemingly extortionary terms of informal finance for the poor provide a strong need and ample space for innovative approaches to serve the financial needs of India’s rural poor. A gap of as high as 85%-90% in supply and demand cannot be closed by only the existing MFIs because many, particularly the younger and smaller organizations, lack the institutional capacity to expand.

Key Concerns

All said and done however, there are certain key issues that need to be tackled before ensuring the benefits of micro-financing would reach their optimum levels.

Scaling-Up Microfinance: Microfinancing through formal and semi-formal can reach self-sustainability only when there is substantial volume which they can generate.

Effective policy, legal and regulatory framework - An enabling policy, legal and regulatory framework is critical to scaling-up. For this the govt. needs to take certain steps as:

Next

* Contributed by: -
Varun Ahuja,
Student Manager,
MBA (IB) - Finance,
Institute of Management Technology (IMT), Ghaziabad.