Article Preview
TopIntroduction
Globally, financial inclusion is a major policy concern with governments across the world (Thankom and Kamath, 2015). India is one of the fastest growing economies in the world today growing at the rate of 7 to 9% p.a. Lack of access to credit is generally seen as one of the main reasons why many people in India and other developing economies remain poor. Usually, the poor have no access to loans from the banking system, because they cannot put up acceptable collateral and/or because the costs for banks of screening and monitoring the activities of the poor, and of enforcing their contracts, are too high to make lending to this group profitable. (Eijkel et al., 2011). Over the past few decades, microfinance has emerged as one of the effective sources of finance for socio-economic development in the world and is recognized as an essential tool of financial inclusion (Soumaré et al., 2020). Microfinance institutions continue to play an ever-increasing role in the socio-economic development of the world at large and the less developed countries in particular. (Memom et al., 2021)
India takes pride in the largest microfinance programme in the world. The industry is growing at a significant rate and is now considered as a sub sector of the finance services industry. The goal of microfinance is to give low-income people an opportunity to become self-sufficient by providing a means of saving money, borrowing money and insurance (Sarumathi and Mohan, 2011). Microfinance institutions (MFIs) enable the poor to undertake income-generating activities to improve their livelihoods and can help them cope with shocks and uncertainties (Fofana et al., 2015). The focus of microfinance is to facilitate the shift from induced development from the above to initiated development from below (Tripathi and Tripathi, 2014).
We are currently witnessing a global debate over whether MFIs adhere to their initial socio-economic mission or are shifting towards prioritizing the achievement of their financial goals (Widiarto and Emrouznejad, 2015). Most MFIs claim to have a dual mission of reaching poor clients and being financially sustainable (Merslandand Strom, 2009). For most MFIs, one objective is to contribute to economic development. This implies reaching out to more clients especially among the poorest population; the main outreach”frontiers” of microfinance (Johnson et al., 2006). The second goal is to achieve this in a manner that is financially sustainable. Microfinance in India is a dynamic sector, but this sector has been difficult to study because of lack of sufficient and reliable information.