‘Role of Microfinance in Financial Inclusion in India’: A Qualitative Study

Abstract

In India, microfinance has been identified as an effective tool for achieving financial inclusion. With a large population and a high proportion of the population living in poverty, access to financial services has become critical for promoting economic development and reducing poverty. Microfinance institutions have been critical in providing financial services to India's unbanked and underbanked population, particularly in rural areas. Furthermore, microfinance institutions provide their clients with a variety of financial products such as microloans, micro-savings, and microinsurance. These products aid in the development of a savings culture, the provision of working capital to small businesses, and the protection against financial shocks. Microfinance institutions have also implemented novel models such as mobile banking and digital payments in order to reach more people. Additionally, the government launched numerous initiatives to support microfinance institutions and promote financial inclusion. However, high-interest rates, a lack of regulation, and insufficient infrastructure continue to stymie the growth of microfinance in India. Finally, microfinance has the potential to significantly contribute to financial inclusion in India. To effectively achieve their goals, microfinance institutions must work to reduce costs, expand their reach, and improve the quality of their services.