Micro Finance and Development Finance in India

Abstract

The term microfinance is widely used to refer to institutions governing savings, credit, insurance and monetary payments by relatively poor people, including those regulated by both official laws and informal norms. Analysis of microfinance is widely framed as a purely micro issue, centered on the motivation and behavior of specific users and providers. However, such analysis is almost invariably located - whether explicitly or implicitly - in a wider view of how the state, markets and society institute poverty. In India as elsewhere, for example, private microfinance organizations is viewed positively as a force for promoting financial inclusion by “making markets work for the poor”; and at the same time viewed negatively as a smokescreen behind which the state can retreat from a ‘social banking’ strategy of mobilizing much larger resources to challenge pervasive and chronic indebtedness.