Micro-credit has far reaching impact in providing financial inclusion and can play a key role in building resilient India. Substantiate (200 Words)
Refer - Financial Express
Enrich the answer from other sources, if the question demands.
IAS Parliament 4 years
KEY POINTS
· Access to small, collateral-free loans for economically productive purposes has helped transform the lives of millions at the bottom-of-the-pyramid—especially women.
· It has helped free them from the clutches of informal moneylenders who would charge exorbitant rates of interest, usurp collateral in the form of land, gold.
· Over the past decade, India’s microfinance industry has grown at a compound annual growth rate of 26% to reach 2.36 trillion.
· It has helped 50 million economically vulnerable Indians, 99% of them women, live a life of dignity and financial independence.
· Recommendations of the Malegam Committee constituted by the Reserve Bank of India (RBI), practices such as relying on credit bureau data to assess a borrower’s creditworthiness have helped the industry immensely.
· Entities engaged in microfinance need to focus on a few specific tasks for the holistic development of the sector.
· One of them is to promote financial literacy through group meetings of borrowers.
· Organizations should complement their microcredit operations with social development projects and community-connect initiatives.
· Prospective borrowers’ indebtedness and ability to repay dues should be assessed properly.
· Loans must be given only for income-generation purposes.
· Every microfinance organization should devote time and resources for capacity building at the grassroots.
