Microfinance- A Tool to Alleviate Poverty

Theory of Microloans:

Earlier, the Indian banking policies were not suitable for the poor people to take advantage of.

So, they had to take the support of non-financial agencies to fulfill their requirements. Later, it

was suggested to unearth some alternative, to help the poor mass and protect them from the

clutches of greedy money lenders. As a result, microloans in India were introduced in the

banking sector.

Microfinance is the provision of economic services such as credits, monetary help, insurance,

deposits, etc. to the underprivileged sections. It literally targets to help the Indian poor mass

upgrade their income and improve their standard of living.

Recent researchers from across the globe suggest that the wide range of the developed

monetary systems is related to the faster economic growth. Thus, microfinance is by now one

of the biggest contributors in bringing sustainability in the Indian economy.

The concept of microloans, offer an easy access to business opportunities and also enable the

poor population to overcome the inflexible social structure. Despite bringing social equality in

the business sector, finance acts as an additional tool in alleviating poverty.

Benefits of Microloans:

1. Impart financial services to the deprived sections.

2. Contributes to the economic growth.

3. Increase the confidence level of the poor.

4. Upgrade the employment level and the income level also.

5. Promote social welfare.

6. Brings equality among the people.

7. Contribute to empowering the women.

8. Elevate the education level of the nation.

9. Contribute in boosting up the economy as a whole.

10. Sustain mutual help and cooperation.

Essential features of Small Scale Loans:

1. Micro financing is an essential branch of the rural finance.

2. It provides small scale loans on low interests or possibly no interests.

3. Micro loans cater the poor population only.

4. It prefer on services to profits.

5. Effective poverty eliminating strategy.

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