Indian Journal of Finance


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“Microfinance in India: A State of the Sector Report, 2006”, a report prepared by Prabhu Ghate and published by Microfinance India and jointly sponsored by Care, Ford Foundation and Swiss Agency for Development & Cooperation, says that ‘microfinance in India has emerged as a powerful tool for financial inclusion, reaching out to a fifth of all poor households who have yet to be reached by the formal financial sector. The larger of the two main models, the self-help group bank linkage programme SBLP covered about 143 million poor households in March 2006 and provided indirect access to the banking system to another 14 million. The other, microfinance institution MFI model, served 7.3 million households, of which 3.2 million were poor.’ Apart from the scorching pace of growth, the report highlights several trends in Indian microfinance. First and, perhaps, most important, the rapid spread of microfinance has provided competition to rural money lenders. “ICICI Bank has catalyzed the creation of over 100 microfinance partners and has been able to extend micro-loans from 20000 clients in 2003 to 3 million clients by March, 2006. Microfinance will emerge as an important development tool that will enable the financial inclusion of rural and urban poor.