The Macrocosm and Microcosm of Microfinance

This paper highlights and analyzes the micro and macro issues that have serious implications on the future of Indian microfinance.

Inspite of growing emphasis on the business aspect of microfinance, the societal impact of the industry, particularly on the vulnerable and underprivileged sections, cannot be ignored. The macroeconomic contributions of microfinance include rural employment opportunities, access to affordable finance, movement towards self-sufficiency at the village level and deepening of the financial infrastructure.

The paper emphasizes the need for government policy interventions to control operational deficiencies in microfinance in order to avoid a corporate social conflict in the future. The macro and micro issues discussed in the article include:

• Policy matters such as interest rates, consolidation of NBFC-MFIs, secured lending etc.;
• Need for proper application of debt to avoid debt trap;
• Need for financial literacy at grassroots level;
• Microenterprise development;
• Danger of overdoing innovation and customization;
• Mechanisms for regulating multiple lending.