Microfinance for Economic Empowerment of Rural India

Abstract

The present study attempts to assess the potential of microfinance to overcome the limitations of formal institutional finance, and effectively contribute to the economic empowerment of the vast majority of rural masses in India. Using a sample survey, information on various socio-economic indicators of beneficiaries of formal institutional finance and those of microfinance was collected to understand the limitations, advantages and impact of both forms of rural credit in India, by undertaking a comparative analysis. After presenting an overview of the formal institutional arrangements for rural credit in the country, the study discusses the findings of a comparative study of members of a primary cooperative credit society and14 self-help groups dealing with microfinance in Baduria block of North 24 Parganas district of West Bengal to examine the degree of penetration of microfinance activities in the district. The sample households covered are 167 members of 14 SHGs and 100 members of the cooperative society. An NGO named Swanirvara has been actively involved in the block for promoting SHG formation and microfinance activities in the district. The study revealed that microfinance very well suits the socio-economic realities of the rural poor in India, and effectively contributes to their economic prosperity. The majority of beneficiaries of microfinance did not possess necessary endowments, technical skills and qualifications for availing of formal institutional finances. Microfinance has tremendous potential for reducing economic inequality and rural poverty, as it covered sizeable disadvantaged lower castes. On women empowerment, however, our observations were mixed.