Microfinance in India: An Overview

This note chronicles the development of microfinance in India. The note identifies four chronological phases in the development of the Indian microfinance movement. These are:

• Early 1900s to 1969, dominated by credit cooperatives;
• 1969-1991, characterized by state-driven programs, entry of NGOs into microfinance and emergence of self-help groups (SHGs);
• 1992-2000, that witnessed the launch of SHG-Bank linkage program and growth of NGO-MFIs;
• 2000 onwards, marked by commercialization of microfinance.

Features common to the phases include focus on poverty alleviation and participation of the State and private players in delivery of microfinance. The note states that new forms of relationships are emerging among the various players and stakeholders in the sector which seek to leverage their different strengths. Penetration of microfinance, however, remains low, with a highly skewed presence in South India.