Microfinance in Delhi: An Illusion

This paper discusses financial exclusion in Delhi, India, and analyzes the microfinance landscape in the city.

According to the 2001 census, about 0.6 million people migrate to Delhi every year from the rural areas in search of livelihood. About 1.5 million poor people live below the poverty line in the city. Microfinance has been able to reach only 10% of Delhi's poor.

There are multiple reasons for exclusion but the vital one is the poor support extended by the Delhi Government to the citys poor. Other problems include high interest rates, low amount of loans disbursed, multiple loans, and multipurpose borrowings by the poor. The paper recommends that the Delhi Government:

• Extend financial help through self help groups to implement programs more effectively;
• Create a forum to enable MFIs to share information and concerns with the government, and incentivize MFI participation in the forum;
• Track creditworthiness of beneficiaries through a card issued by the central information cell and allow banks to access credit information;
• Enable MFIs to promote financial literacy among clients;
• Initiate minimal or zero savings bank accounts for the poor.