Microfinance in India - A Catalyst of Financial Inclusion and Economic Growth: With Special Reference to Bihar

Abstract

Microfinance has emerged as a vigorous tool for alleviation of poverty and unemployment. It is also the catalyst of financial inclusion, specifically in developing regions. This paper highlights on the concept of microfinance, Microfinancing Institutions (MFIs), their outreach, and their socio-economic impact on the local population and in fostering sustainable development. Almost a hundred million rural households have seen an improvement in their standard of living due to microfinance during its three-decade journey. Regulations and government initiatives have aided in the sector's expansion, providing direction for its growth. In India, microfinance institutions have been instrumental in providing small loans, particularly to underprivileged groups who lack collateral. They are making a significant impact on the nation's effort to achieve financial inclusion. The microfinance industry is highly heterogeneous, with a wide range of organisations operating under distinct legislative frameworks. It includes banks, SFBs, NBFCs, non-profit MFIs, and NBFC-MFIs. This study is an attempt to ascertain the efficacy of microfinance in India, with a specific focus on the structural fabric of Bihar, a state known for its socio-economic challenges.