| Pub. Date | : October, 2021 |
|---|---|
| Product Name | : The IUP Journal of Accounting Research and Audit Practices |
| Product Type | : Article |
| Product Code | : IJARAP391021 |
| Author Name | : C Anitha*, S Galab** and D Raghunatha Reddy*** |
| Availability | : YES |
| Subject/Domain | : Finance |
| Download Format | : PDF Format |
| No. of Pages | : 8 |
The income inequalities that have widened the gap between the rich and the poor
lead to financial exclusion, consequently depriving access to credit and financial
services such as savings, loans, insurance, payments, remittance facilities and financial
counseling or advisory services by the formal financial system to underprivileged groups
such as weaker sections and low earning groups. The Government of India (GoI) realized
the importance of financial inclusionand had taken measures to address the issues of exclusion.
The quintessence of financial inclusion is to make sure that a range of suitable financial
services are accessible to every individual, enabling them to realize and access the formal
financial system.
Microfinance (MF) plays a crucial role in delivering credit to the poor segments of the
society, who lack access to formal sources of credit and financial services. Anitha and Reddy
(2017) studied the major initiatives taken by the Indian government for the growth of MF in
India. MF created a channel to facilitate the formally excluded population who were not
eligible to receive through formal sources of funds and financial services due to lack of
proper credentials. In MF sector, Microfinance Institutions (MFI) provide credit, thrift and
other financial services to these segments.
Initially, Indian microfinance industry witnessed growth of many MFIs, especially NGOs,
inspired by Grameen model in Bangladesh to serve the poor. A majority of these NGOs
were either registered as trusts or societies.
In January 2000, RBI created a new legal class/entity - Non-Banking Finance Company-
Micro Finance Institution (NBFC-MFI) to address the scalability and funding issues of NGOs-
MFIs. Around 2005, Indian MF sector witnessed the emergence of a new organizational
format the NBFCs. NBFCs are distinguished from other conventional microfinance