An Essay on Micro-Finance: An Effective Tool of Poverty Reduction in India

Abstract

Access to financial services is essential for the poor and vulnerable section of society. Employment possibilities will be generated which will reduce poverty. However, due to excessive risk and inadequate collateral given, traditional financial institutions are limited in their ability to serve the unbanked section of society. Farmers, landless labourers, rural artisans, and women who must pay a moneylender an outrageously high rate of interest is among these unbanked people. Microfinance institutions were created and supported by the government and NGOs to get around these restrictions. Self Help Groups (SHGs) are such a type of community-based microfinance organization. This commentary examines how the microfinance model (SHG) can eradicate poverty in rural India.