India has over 260 million people living in poverty. Poor are continuously plagued by the high level of unemployment and over it they are burdened under a high debt which never seems to be ending due to high rate of interest and complex payment structure. This situation seems to be never ending.
The ray of hope lies for rural population in profiting from the businesses which they own, but are often demoted because of the inadequate financial support. The microenterprise sector (small farmers, small-scale traders, artisan producers) desperately need access to financial services – including credit and saving products.
These people often do not even have a house as an asset in their name, Microfinance programs help to fight against poverty through financial inclusion. Even Women who face difficulties as well as are vulnerable shocks and risks are provided support. It has been identified that in order to preserve natural resource and also to gain their participation, local people have to be shown development which they have been left deprived of from decades. Therefore, building their livelihood in a more sustainable way will help themselves as well as government.
Microfinance covers a wide array of microfinance institutions (MFIs), ranging from indigenous rotating savings and credit associations (RoSCAs) and self-help groups to financial cooperatives, rural banks and community banks as well as non-bank financial institutions (NBFIs) including credit NGOs, all the way up to development banks and commercial banks, microfinance proper refers to a system of financial intermediation between microsavers and microborrowers. Often these institutions require start-up funds to reach the areas where regional banks don’t even have presence therefore acting as the idle institution for the financial linkage strategy for the rural entrepreneur.
Organisations like Foundation for sustainable development (FSD) provide financial support to such micro enterprises which have the potential and have substantial know how to manage their project. FSD partners with several community-led organizations in several regions in India which works to increase economic opportunity for underserved populations. These grassroots initiatives offer thousands of marginalized groups the training, financial resources, and job opportunities needed to rise out of poverty.
Start-up microfinance programs that they struggle with operational, financial, or institutional sustainability, point of concern is how linking between can be brought in place. Microfinance industry has capability and can play a very greater role in servicing the rural micro-enterprise sector.
Author: Ajay Pal Singh Chabba/ RESET editorial
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