Building Social Capital Through Microfinance: A Perspective on the Growth of Microfinance Sector with Special Reference to India

The paper examines the growth of microfinance in India and around the world. After evaluating the global environment, it reveals that:

• There is a high demand of microfinance all over the world;
• Microfinance is not limited to rural society or developing countries only; it is equally applicable to urban society and developed countries.

The paper cites the reasons for emergence and growth of microfinance in India:

• The failure of institutional initiatives of rural credit;
• Exploitation attached with the informal system of credit.

Describing the genesis of microfinance, the paper states that there was no smooth flow of funds from any source to provide loans to the rural poor for establishing their micro enterprises. Hence, non-government organizations (NGOs) came forward and adopted different strategies of promoting people's livelihood through microfinance. Today:

• The NGOs promote Self help Groups (SHGs) and act as financial advisers to them;
• Some donor agencies provide bulk loans to NGOs, who then act as microfinance institutions (MFIs) and re-lend the money to the poor;
• NGOs help the rural unemployed persons to acquire training through micro-enterprise development programs.

The paper concludes that the microfinance sector is seen as the best option for poverty alleviation, based on saving mobilization of the poor people and credit linkages.