Academy of Accounting and Financial Studies Journal (Print ISSN: 1096-3685; Online ISSN: 1528-2635)

Research Article: 2021 Vol: 25 Issue: 4

Microfinance: Indian Context: Bibliography of Unclassified Literature

Kalyan kumar Sahoo, Arni University

B. Raja Mannar, Global Humanistic University

MD. Mafijul Islam, Durakij Pundit University



One can still have literature sources in works such as narratives, observations, assignments, communication, article, books, rhyme, dissertations, programs, and theory, along with others. This is why literature review engrosses examining the pages of any in print literature like books, newspapers, magazines, websites, webpage, assortment, paper, brochures, and the like where you may be capable to discover some reference to the matching matter that you are researching on. This article provides a review of the recent literature on microfinance in developing countries and a critical assessment of its effectiveness. It examines the experience of India, which has one of the largest microfinance sectors in the world, and particularly the unfolding of the microfinance crisis in Andhra Pradesh. It concludes that microfinance cannot be seen as a silver bullet for development and that profit-oriented microfinance institutions are problematic. To fulfil even some of its progressive goals, it must be regulated and subsidised, and other strategies for viable financial inclusion of the poor and of small producers must be more actively pursued.


Microfinance, Indian Context, Bibliography of Unclassified Literature and Review.


Microfinance is a category of financial services targeting individuals and small businesses who lack access to conventional banking and related services. Microfinance includes Microfinance, the provision of small loans to poor clients; savings and checking accounts; microinsurance; and payment systems, among other services. Microfinance services are designed to reach excluded customers, usually poorer population segments, possibly socially marginalized, or geographically more isolated, and to help them become self-sufficient.

The literature on Self Help Group (SHG), Joint Liability Group (JLG) and microfinance are relatively one of the youngest. Although, the Credit unions and lending cooperatives have been around globally for hundreds of years. Neither microfinance nor Microfinance was used, as terms, in the academic literature or by development aid practitioners before the 1980s or 1990s, respectively. The concept of providing financial services to low-income people is much older. Hence SHG and microfinance can be said as a recent movement, and it is the youngest field of research, but the origin may be traced back to approximately thirty years, so the literature available is fairly large. Since the volume of literature is large, the review is limited to the core issues to identify the major trends. Here in this chapter, the existing literature on the important term is presented. It covers the existing relevant literature on SHG‘s, JLG‘S, microfinance (positive, negative and mixed results, impact of microfinance).

In general micro finance envisages the following and the associated research is based on any one of the aspects.


Microfinance has been observed as a catalyst in bringing a change within the socio-economic empowerment of women in diverse parts of the country and in several parts of the world which necessitates the researchers to conduct impact and comparative studies on different models of microfinance and highlight the results thereof. This overview of the literature is aimed at depicting the area, findings, challenges and future implications of several research studies conducted by different national and international scholars as shown in Table 1& Table 2.

Table 1 Different Aspects of Micro Finance on Which the Research is Based
Over view of Financial Exclusion Causes of Financial Exclusion
Consequences of Financial Exclusion Financial consequences of financial exclusion
Social consequences of financial exclusion Evaluation of Impact of SHGs
Measuring Financial Inclusion Financial Inclusion based on banking outreach
Financial Inclusion based on individual/household level access Self Help Group (SHG) Bank Linkage Programme in India
Bank’s Perspective Sustainability of SHGs
Innovative Microfinance Mechanisms RBI initiatives for Financial Inclusion
Factors affecting Sustainability Research gaps
Table 2 Earlier Literature Studies on Micro Finance
Author/s Title Citation
Brau, James C, Woller & Gary M "Microfinance:: A Comprehensive Review of the Existing Literature," Journal of Entrepreneurial Finance and Business Ventures Vol. 9: Issue. 1, pp. 1-28. 2004
G.L. Sharma & Himanshu Puri Effectiveness Of Microfinance: A Literature Survey International Journal of Advanced Research in Business Management and Administration, Vol.:1, Iss:1, Year: Pages:105-11, 2013
Roy & Arup GoswamiChandana, A scientometric analysis of literature on performance assessment of microfinance institutions (1995-2010) International Journal of Commerce and Management, Volume 23, Number 2, June 21, 2013
Ritika Singh, Mitali Sen and Chandan Bhar, Nishi Malhotra & Pankaj Baag , A Literature Review: Self-help Group Bank Linkage Programme : Microfinance from Information Systems perspective– A review International Journal of Scientific & Engineering Research Volume 4, Issue 2, February-2013
Beena George A Review of Literature on Micro Finance and Women Empowerment International J. of Sciences, Vol. 16, No 1, pp 505-522, 2014
Sangeeta Arora & Meenu Microfinance Intervention- An insight into related literature with special reference to India, American Journal Of Social & Management Sciences, 1(1): 44-54, 2010
Preeti Gupta Efficiency and Sustainability of Microfinance Institutions: A Comprehensive Review of Literature, Journal Of Finance &Accounting, Vol 2, Issue 1, 2015 | Pages: 115-129
Anshu &
Satish Kumar Gauba
A Literature Review of Micro Finance in India International Journal of Management & Business Studies, Vol. 3, Issue 2, 2013
Najmul Hoda1 & Shankar Lal Gupta Faith-based Organizations and Microfinance: A Literature Review Asian Social Science; Vol. 11, No. 9; 2015
Vivek Kumar Tripathi & Vineet Kumar Tripathi The Systematic Literature Review And Researches On Development of Microfinance Industry In India, International Journal of Interdisciplinary Research Vol.2, No.1, pp.13-24, June 2015

A study of the earlier reviews on Microfinance clearly indicates the inadequacy of the quantum of work in all respects with reference to the Indian context. There appears a potential research gap and quantifying the contribution of Self Help Groups (SHGs) to the financial performance of states/ Union Territories (UTs) in India. Further, a review of Microfinance in the Indian context of recent origin is not available. The present paper is expected to fill in the gap in this connection.

The majority of the existing studies on financial inclusion have focused on determinants of access to and usage of financial services. Most of the studies have catered to country-specific data for measuring the extent of banking outreach, and to household/individual survey level data for determining factors affecting financial inclusion. However, the most important stakeholder for the successful implementation of financial inclusion schemes, i.e. banks and bankers have rarely been the focus of analysis in the context of financial inclusion studies.

Most contributions in the fast-growing literature on microfinance seem to agree that all the stakeholders (borrowers, lenders, communities, government and regulators, and interested third parties) should become fully aware of the potentiality of the joint value creation achieved through cooperation.

An extensive review of literature helps in understanding and identifying a few research gaps that need to be addressed. The present study aims at (i) pooling up a bibliography of microfinance in the Indian context and (ii) To briefly reviewing the various contributions.

Literature Review

Microfinance originally had a limited description - the prerequisite of micro loans to poor entrepreneurs and small businesses lacking access to banking and related services. Over time, micro-finance has come into view as a superior association whose object is a world in which everyone, particularly the poor and under- marginalized people and households have the right of entry to an extensive range of reasonable, high-quality financial products and services, including not just credit but also savings, insurance, payment services, and fund transfers reported (Goya & Maheshwari, 2017)

The study of Arun & Jayaram (2008) set out to examine if the macro-level policies of the organization affect the dealings with the clients. The study focuses on two MFIs operating in Karnataka, Ujjivan and Grameen Koota. The reason for choosing these two MFIs is that while one of them, Ujjivan, is funded by external investors including foreign funds, the other, GK, is funded by donors. For the purpose of the study, interviewed field workers, attended centre meetings with them and have also spoken with the head offices to know their perspectives on the issues raised by us. The report is structured in such a way that the two institutions under study are presented as separate cases, after which the similarities and differences between them are identified and analyzed.

In this study of microfinance institutions (MFIs) and their participants, (Murshid & Murshid, 2022) show how certain innovations made by MFIs during the COVID-19 pandemic enable further consolidation of NGOs in Bangladeshi society. The study is based on interviews conducted in 2020 with key personnel from three major NGOs in Bangladesh: Grameen, Sajida Foundation, and Brac (which is also the largest NGO in the world), as well as 20 interviews conducted in 2018 (before the pandemic) with Microfinance recipients who use financial services. We observed that MFIs scaled up by taking on the function of relief provision, financial services became more entrenched, and NGO governance was bolstered as MFIs served as intermediaries between the state and people, even though, as the 2018 interviews reveal, microfinance participants were reticent about technology uptake.

The microfinance has come forward to fill the gap and is considered as an effective tool for poverty reduction and socio-economic development. The impact of microfinance is still questioned and varies from one country to another and from urban to rural. The paper of Tanwar (2018) is structured into three parts the first part analyses the growth of microfinance in India and secondly, it examines the role and performance of the NABARD and other institutions in strengthening the SHGs and MFIs and lastly the paper presents a brief discussion on the shortcomings and recommendations to be adopted to make microfinance more inclusive.

This working paper presented by Nasir (2013) tries to outline the prevailing condition of the Microfinance in India in the light of its emergence till now. The prospect of Micro-Finance is dominated by SHGs (Self Help Groups) - Banks linkage Program. Its main aim is to provide a cost effective mechanism for providing financial services to the poor. Recently Union Rural Development Minister Jairam Ramesh wanted the help of SHGs for the establishment of DRDO designed bio-toilets in rural areas. This paper discovers the prevailing gap in functioning of MFIs such as practices in credit delivery, lack of product diversification, customer overlapping and duplications, consumption and individual loan demand with lack of mitigation measures, less thrust on enterprise loans, collection of savings/loans and highest interest rate existing in micro finance sector. All these are clear syndromes, which tell us that the situation is moving without any direction. Finally, the paper concludes with practicable suggestions to overcome the issues and challenges associated with microfinance in India.

Sangeetha & Chitra (2021) aims at exploring the solvency and survival positions of the Private & Public NBFC MFIs. Based on the Altman’s Z revised score model (applicable for financial institutions) and Survival analysis, the results reflect that Private NBFC MFIs are solvent and had better survival than Public NBFC MFIs. It aims at understanding the factors discriminating the solvent and insolvent Microfinance Institutions.

Janardhan & Uma (2020) determines the role of firm-specific characteristics such as firm size, firm age, liquidity, firm complexity, board independence, institutional ownership, non-performing assets, annual volatility of stock returns; leverage and internal control represented by Enterprise Risk Management (ERM) and Big4 auditor on the firm value measured using Tobin’s Q, Return On Equity (ROE) and Return On Assets (ROA).

Earlier studies have observed that the integrated approach of ERM guides management to diagnose risk and evaluate effective strategies for managing the organization's exposure with its risk requirement. This paper intends to propose a conceptual model for identifying the determinants of firm value by examining the correlation between the existence of Risk Management Committee or Chief Risk Officer, Audit Committee, and Firm Value on ERM implementation. The results of this proposed study by Anju & Uma (2017) could be of primary importance in analysing whether the companies that adopt ERM has increased their firm value.

The present paper of Tripathi (2014) highlights the microfinance & evaluates the position of microfinance. Traditionally, people have saved with and taken small loans from individuals and groups within the context of self-help to start businesses or farming ventures. In spite of many organizations of microfinance, microfinance is not sufficient in India. The study explores some suggestions to make microfinance more effective. The potential for growing micro finance institutions in India is very high. Microfinance market in India is expected to grow rapidly, supported by government of India’s initiatives to achieve greater financial inclusion, and growth in the country’s unorganized but priority sector.

This research paper presented by Shailesh (2016) involves study of the past literatures about the microfinance sector, related online research papers and journals. The annual reports and the sector reports published by regulatory bodies, MFI associations and major microfinance players facilitated the study, especially in understanding the size, growth and past trends. Interactions with some of the experts helped in understanding and analysing the emerging concerns in the microfinance sector and also to look for some possible solutions.

There are two broad approaches that characterize the microfinance sector in India is Self Help Groups (SHGs)-Bank linkage programme and Microfinance Institution (MFIs). In India microfinance is dominated by Self Help Groups (SHGs)-Bank linkage programme aimed at providing a cost effective mechanism for providing financial services to the unreached poor. The present paper, (11) aims at identifying the current status and role of microfinance in the development of India.

Financial inclusion has emerged as a major policy objective in the country; Microfinance has become a medium of extending financial services to unbanked sections of population through the Jan Dhan Yojana. Financial literacy too plays an important role as people have to be informed about how to use financial services. Transparent pricing plays a crucial role as it increases fair competitiveness and the borrowers don’t end up borrowing more than they can repay. Reforms in terms of proper regulations, offering complete financial products, entering rural markets, technology to reduce operation costs, can help turn the dream of achieving universal digital financial inclusion into reality and give a boost to the Indian economy. The paper (12) trails the advent of financial inclusion in India, understands the current status, analyses the gaps and reviews the reforms the present government has brought about to boost India’s rural economy.

The rapidly opening economy is widening the gap between the rich and poor. To have a sustainable life style along with saving and investment, microfinance allows the poor to get the loan that leads to financial independence and growth. The poor use these loans in a productive manner to create their businesses, assets of their own and get rid of poverty once and for all. These loans are aimed at empowering the impoverished people to start their own businesses and to grow their money so that they can achieve long-term financial independence and develop sustainably. Economic growth, sustainable development and poverty alleviation can be achieved effectively with the help of an instrument like Microfinance. Dey (2015) focusses the challenges and suggestive measures for growth of microfinance in Indian context for a sustainable development.

The Indian Microfinance Sector has witnessed a phenomenal growth over the past few years. The number of Institutions providing microfinance services has gone up from a few to several hundreds. The Government of India and the Reserve Bank of India has created conducive policy and regulatory framework for Microfinance Institutions (MFIs) to operate in the country. The quantum of credit made available to the poor and financially excluded clients has gone past ?60,000 crore and number of clients benefitted is close to 40 million as of March 2016. The present research article, by Banana (2018) is to study the overall progress of MFI-Bank Linkage Program.

Manoharan et al. (2011) studied the financial performance of various microfinance institutions operating in India based on their operating profile, financial health and performance

Microfinance is a widely promoted developmental initiative to provide poor women with affordable financial services for poverty alleviation. One popular adaption in South Asia is the Self-Help Group (SHG) model that India adopted in 2011 as part of a federal poverty alleviation program and as a secondary approach of integrating health literacy services for rural women. However, the evidence is limited on who joins and continues in SHG programs. Ahmad et al. (2022) examines the determinants of membership and staying members (outcomes) in an integrated microfinance and health literacy program from one of India’s poorest and most populated states, Uttar Pradesh across a range of explanatory variables related to economic, socio-demographic and area-level characteristics.

Nagaraju & Ramesh Reddy (2016) made an attempt to understand the concept of microfinance, the operation and to identify the latest issues, problems and challenges in effective implementation of various Microfinance programmes. Secondary data forms the basis for this paper as the study is descriptive in nature. Books, various websites, magazines, newspapers, and publications of recent research papers available in different websites are the sources of data.

Yadav (2016) highlighted the meaning of microfinance, its emerging role, issues and challenges being faced in India. The paper also represents the microfinance meaning and definition provided by the authors. This paper further explains the need and challenges that are faced by the poor people in India and providing them financial helps, in way of Microfinance to start their own small businesses, so they can generate income and provide for their families. The study explores some issues, challenges and offers some suggestion to make micro finance more effective. Hence, Government, RBI and various MFI’s have to face various challenges and to overcome with these challenges and issues some preventive measures are also taken by these financial bodies so that to provide benefits to the poor people and social class of the society. On the basis of need, issues and challenges related to microfinance, the study predicts the new agenda for future.

Mahanta et al. (2012) delineates three distinct aspects of microfinance, first growth of microfinance in India and some other countries; secondly it discusses the role played by NABARD and other National Banks in growth of SHGs and Grameen Bank. Third, it deals with the role of government in framing legislation for protection of right of micro borrowers. The study also deals with the need for a regulatory body to regulate, develop and guide the numerous MFIs and NGOs who work in the field of Microfinance. The paper discusses the factors and theoretical position associated with evolution of microfinance and its role in global scenario.

In a developing country like India with a lot of people residing in rural areas, micro finance is undoubtedly the best implementation. Self Help Groups of India has emerged as the world’s largest and most successful network of Community Based Organisations. The main goal of an SHG is to elevate the living conditions of the rural poor with a maximum emphasize on women. Sakshi & Károly (2018) presented a paper’s which explains the situation of micro finance in India and to explain the main channel of micro finance in India which is SHGs and the details of the SHGs.

Microfinance is considered to be revolutionary because it aims at servicing the poorest of the poor, who were up till now considered unfit for financing of any kind except charity. It acts as a catalyst to organize the unorganized for social change. But the outreach is too small as compared to the requirement and potential. Currently India is considered to be the largest emerging market for microfinance. It has been growing in India at a steady pace over the past decade. Apart from this growth there are some issues and challenges concerned with it. This lays emphasis on the problems, issues and challenges prevailing in India regarding Microfinance. An attempt is made by Jain & Jain (2014) throughout the paper to evolve strategies to solve these problems and issues.

Chippa et al., 2014 emphasized various measures initiated in the state to bring about women empowerment through microfinance in Rajasthan. He focused on various opportunities, developments and challenges in its way and gave recommendations for improving the situation.

According to Bansal, there is a need for technical innovations to improve the quality of microfinance services. A number of electronic devices are being used in different countries to expand outreach and improve microfinance functioning. Some of these devices are mobile phones, ATMs, processor cards, computers etc. but there is enough scope to use such innovative techniques in the microfinance sector in India.

Microfinance is that wing of providing finance which deals with providing financial services to the poor such as the supply of loans, savings etc. India has witnessed rapid growth over the last few years in the microfinance sector. In this paper, an attempt has been made to study the role and growth of microfinance in India with special emphasis on the Microfinance crisis in Andhra Pradesh. An attempt has also been made to study Microfinance through Porter’s five forces analysis. Mehta & Aggarwal (2014) focuses on the Microfinance aspect as microcredit is still the largest function of microfinance business in India.

Microfinance services are mainly facilitated by two models that are Self Help Group - Bank Linkage Programme (SBLP) Model and Micro-Finance Institutions Model (MFI). These both together have about 7 crore clients. Self Help Groups have been created in rural and urban areas of the country. It generally includes fifteen to twenty members hailing from a positive locality with related socio-economic conditions. The main purpose of the study of Deepa & Priyanga (2022) is to measure the influence of microfinance through SHGs in Theni District. It is concluded that the mean score of Mode of Savings on Banks, the mean score of Mode of Savings on the NABARD, the mean score of Household Expenditure on Repayment of Loan by the SHG members in Theni District is higher among the respondents after joining the entrepreneurs schemes (Saini et al., 2017).

Overview of the literature on Microfinance in the Indian Context

Microfinance initially had a limited definition: the provision of microloans to poor entrepreneurs and small businesses lacking access to credit. The two main mechanisms for the delivery of financial services to such clients were: (1) relationship-based banking for individual entrepreneurs and small businesses; and (2) group-based models, where several entrepreneurs come together to apply for loans and other services as a group. Over time, microfinance has emerged as a larger movement whose object is: a world in which as everyone, especially the poor and socially marginalized people and households have access to a wide range of affordable, high quality financial products and services, including not just credit but also savings, insurance, payment services, and fund transfers.

New research in the area of microfinance calls for better understanding of the microfinance ecosystem so that the microfinance institutions and other facilitators can formulate sustainable strategies that will help create social benefits through better service delivery to the low-income population.

Highlights of the observations are incorporated here.

Reasons Microfinance Failure

Most Microfinance loans are used to fund consumption as well as development. Studies have shown that many beneficiaries use their loans to cover short term emergencies rather than address long-term economic growth. The result is that that Microfinance may have minimal impact on income growth.

1. Most Microfinance programs produce over-indebtedness. The dark side of Microfinance is micro debt. Microfinance introduces external debt into a community and can produce unhealthy dependence. Microfinance can also diminish existing informal safety nets and adversely affect social cohesion. (6) Many who receive loans lack ability to repay the loans and don't develop an incentive to generate their own sustainable source of funding.

2. Most Microfinance loans are expensive and rely on high interest rates to meet operation costs. Microfinance, which targets the poor, is much more expensive than commercial bank loans aimed at middle- and upper-class populations. Microfinance is rarely sustainable among the poor at modest interest rates and very rarely reaches the poorest.

3. Most Microfinance loans promote economic inefficiency. In communities where Microfinance is widely employed, copycat businesses often develop with a limited local market. Microloans enable the creation of new businesses, but the new businesses replace existing ones. Competition and lack of consumer demand in poor communities’ drive business failure and the majority of new businesses fail within a short time.

4. Most Microfinance programs exploit rather than empower. The commercialization of Microfinance over the past fifteen years has had a major negative impact: "commercial Microfinance institutions are subject to demands for ever-increasing profits, which can only come in the form of higher interest rates charged to the poor, defeating the very purpose of the loans." Heavy handed collection tactics have been documented as exploitative interest rates are combined with extortion. Financial literacy and education are often excluded as precursors to loan products. As a result, many poor become trapped in deepening cycles of poverty and debt.


1. Microfinance institutions have faced a lot of issues regarding their performance and sustainability.

2. Microfinance institutions have been viewed as an important tool in poverty alleviation and financial inclusion. It is an important sector which would improve the living conditions of the poor and lead to the development of the country. Some of the issues faced by microfinance institutions include high-interest rates, multiple lending, coercive methods of recovery, lack of transparency etc.

3. The MFIs incur high operating costs because of their business model which is the doorstep service, and delivery model. They incur these costs because of training of staff and small loan sizes. These higher operating costs are the major reason for the higher interest rates of MFIs. These operating costs could be reduced by the use of technology.

4. Mobile banking would also provide a valuable tool for reducing costs. Technology is an important tool in building the operating system for the identification of borrowers and the communication of data.

5. The UID (Unique Identification Program) project and the use of bio-metrics would serve as a valuable tool for the microfinance sector. This would provide sufficient details about the identity of the borrower.

6. A separate agency such as CIBIL could be set up for microfinance institutions to access the creditworthiness of the borrowers. This would reduce over-borrowing and control delinquency without resorting to coercive methods of recovery.

Limitations of the Study

The studies are generally simple attempts to make an understanding of implications and experience of literature of microfinance on the grounds of reality. Since the studies are a part of learning process, the area covered in the study is very small and based on limited sample size too, which forms major limitation of the study. Being subjective, to the area and samples drawn for the study, the study can be treated as simple empirical illustrative attempt in the field of vast and mounting literature on microfinance. So, further more comprehensive and similar empirical studies are essential for confirming the results. Present studies excluded some important aspects related to self-help groups like group savings and internal lending; as sample consists of individuals belong to groups with different maturity periods. The studies can be extended by adopting more scientific sampling like stratified sampling and also by including a group of non-participants of microfinance programs belong to similar socio-economic background, will further help to improve the effectiveness of the study. Best efforts had been made to get the most realistic picture on the role of microfinance in women empowerment, within the constraints of time and resources.

Research Gaps

Extensive review of literature helped in understanding and identifying few research gaps that need to be addressed.

Majority of the existing studies on financial inclusion have focused on determinants of access to and usage of financial services. Most of the studies have catered to country specific data for measuring extent of banking outreach, and to household/individual survey level data for determining factors affecting financial inclusion. However, the most important stakeholder for the successful implementation of financial inclusion schemes, i.e. , banks and bankers have rarely been the focus of analysis in the context of financial inclusion studies. We posit that since there is very limited research on perception of bankers towards financial inclusion initiatives, so we have undertaken research on the perception of bankers on such initiatives.

Suggestions for further Researchers

The review of studies pertaining to Microfinance and women empowerment depicts that SHG based micro finance has contributed as a catalyst of the social change and empowerment of poor is proved to be a boon for the rural women in some states of India and some parts of the world. Moreover it has created opportunities for promotion of income generating activities and has enabled them to come above poverty line. There is a geographic/regional concentration of the SHG concept which needs to be scattered across the nation as poverty has a uniform concern. Poor people’s access to formal banking system would act as a key to economic growth and sustainable development. It has been observed in various studies that women have gained confidence by being the part of these community organizations and coming out of the façade of being helpless and dependent on their male counterpart, financially and emotionally. Women have been amongst the socially excluded class since long, but now it is the high time to bring them out of this identity crisis to reach the goal of women emancipation and sustainable development with social justice. Further researches can be undertaken to explore the role of community organizations in political participation of rural women, potential for a mix group of men and women to overcome the problems of group management. The study in question has considered a group size of 10-12 members whereas there are large groups in existence, so a comparative study on the performance of SHGs on the basis of size of the group may be undertaken. Lot has been done and a lot can be done in quest for the relevance of rural growth and developmental programs.


Microfinance has been an important tool in poverty alleviation, empowerment of women and in bringing about financial inclusion. However, India has the highest number of households, about 145 million, which are excluded from the banking system. Also, out of the 6 lakh villages in India, only approximately 50000 have access to finance. (as on January 2011). Globally there are about 2.5 billion people which constitute nearly half of the world’s adult population do not use formal financial services (data as on January 2011). Out of these 2.5 billion, nearly 2.2 billion of the unbanked population live in Africa, Asia, Latin America and the Middle East. Hence there exists a great opportunity for the microfinance sector to provide credit to the low-income population thereby reducing poverty and thus the development of the country as a whole.

Although the microfinance sector has reported impressive growth, with the ordinances passed by the government, there is a lack of capital for some of the microfinance institutions in the country. Therefore, continuous efforts are required to diversify the sources of funding available for microfinance institutions in order to attract foreign investments for well-established microfinance institutions in order to serve the rural low-income population, increase the efficiency of staff members, alleviate poverty and also make them profitable.

The large ten microfinance institutions dominating the sector, the other small microfinance institutions can adapt their business models, policies and practices in order to increase their outreach and to operate on a sustainable basis. With the awareness of promoting the microfinance sector and incorporating financial inclusion, many banks have become committed in providing their service. The government has also taken an increasing interest in promoting the sector.


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