The Macrocosm and Microcosm of Microfinance

Abstract

As microfinance becomes the flavour of discussion with abounding literature being presented earlier that applauded the poverty alleviation that microfinance has catalysed, there is also this growing body of evidence that criticises the ‘dark side’ to the extent of almost overlooking the benefits that the sector has brought about. The current popular press bashing Non-Banking Finance Companies (NBFC) microfinance operators, as exploitative, should not overlook the tremendous positive macro-economic impact that microfinance in the last 3-4 years has created. With a lot of policy level, thirty thousand feet above the ground, discussions and opinions are being liberally churned out in the press, the view is less likely to help unless one understands the basics of the current concerns in microfinance. Cash-flow analysis, credit checks, prevalent on-field practices, interest rates, multiple lending the urge to innovate create the perfect case for the need to regulate the estimated multi-billion dollar microfinance market in India.

Keywords: Microfinance,Micro-enterprise development, interest rate, rural development, economic development, poverty alleviation, financial inclusion