Microfinance in India

By Abhinash on February 18, 2012
Image by Mary Newcombe on Flickr

Microfinance has become an indispensable part of India’s economy. The financial needs of India’s rural areas reflect the volatile, uncertain, and irregular income streams and expenditure patterns. Critical examination of their prerequisites shows that poor people value financial services and want them to be reliable, convenient and flexible [1]. India boasts a range of institutions providing microfinance which consists of formal financial institutions at one end of the spectrum and private moneylenders at the other.

Small Industries Development Bank in India (SIDBI)

In the middle of the band lies semi-formal microfinance providers. Notable formal sector microfinance providers in India are SIDBI (Small Industries Development Bank in India), ICICI Bank, SBI Bank, etc. Despite numerous efforts, the informal sector consisting of landlords and traders provide microfinance facility at high rates. A study conducted by RFAS in 2003, reported that 44% of rural households still borrow money from informal agents [2].

Microfinance for the upbringing of women

Careful considerations of the past and prevailing situation in India makes it indispensable to explore the relations between gender-based inequality and micro-finance. Numerous studies have been conducted in the past on gender-based inequality and women empowerment in microfinance [4]. Although women have constituted a pivotal part of the total labour force in India, the race has been besieged with bias and discrimination. An overwhelming portion of the total workforce in rural India is self-employed. Women in the workforce are generally home-based workers such as garment makers, weavers, craft people and food processors and vendors [3]. Women in this section are embroiled in a vicious circle of indebtedness, poverty, low incomes and limited government assistance. SEWA (Self-Employed Women’s Association) is the first Self-Help Group (SHG) formed by these women in 1972 with an aim to strengthen its members’ bargaining power to improve their income, employment and access to social society.

The mainstreaming of gender in development planning is critical in determining the extent to which men and women could participate in and obtain benefit from developmental interventions. The empowerment of women is one of the central issues in the process of development of countries all over the world. In India, it is estimated that there are 92 million working women through 90% of them work in the organised sector [5].


  1. Murdoch and Rutherford (2003), as cited in Basu (2006).
  2. As demonstrated in Basu (2006).
  3. Jayshree Vyas in Karmarkar (2008).
  4. See Mayoux (2006); Mohanty (1995); Elliott (2008); Chakrabothy (2006); Karmarkar (2006); Ahmad (2009). Rais Ahmad conducted a vast study spanning into several years and 3 parts.
  5. In a study conducted by Kaur and Gandhi (2006), they explore the issue of women empowerment in Jalandhar, Punjab.