Exploring the Evolution and Impact of Microfinance in India

This paper explores the evolution and impact of microfinance in India and discusses the development of credit-scoring models for the underbanked and unbanked populations. It examines the historical progress of microfinance, highlighting significant initiatives like the Self-Help Group (SHG)-Bank Linkage Programme and Joint Liability Group (JLG) models that have been pivotal in extending financial services to marginalized communities. The adaptability of microfinance institutions (MFIs) in addressing diverse socio-economic challenges is emphasized.

Despite significant advancements, the paper identifies ongoing challenges, including limited access to capital, regulatory constraints, and inconsistent investment validation methods. Addressing these challenges requires coordinated efforts from policymakers, financial institutions, and MFIs to foster a supportive environment for the sector’s growth and sustainability.

The study also underscores the critical need for robust credit scoring models tailored to the unique needs of the underbanked and unbanked. These models are essential for assessing creditworthiness accurately, managing risks, and ensuring the sustainable growth of MFIs