Micro Finance in India- A Tool for Rural Development

Abstract

India is a developing country. Indian population comprises approximately one sixth of the world’s
population. In India more than 70% of the population lives in villages and most of these villages are
underdeveloped.
The "rural sector" means any place as per the "latest census" which meets the following criteria,
 A population of less than 5,000
 Density of population less than 400 per sq km and
 More than "25 per cent of the male working population" is engaged in agricultural pursuits.
Microfinance is generally defined as financial services for poor and low-income people. Microfinance is
a tool for financial inclusion. After the year and after so many practices and plans rural peoples are still
away and unaware about the financial services and products. They are not able to avail these financial
services. In India lots of problems are faced by rural people like lack of money, illness, illiteracy, etc.
Microfinance helps the entrepreneurs, small business persons and rural people to generate income,
build assets, smooth consumption, and manage risks. The Scheme of Micro-finance has been found as an
effective instrument for lifting the poor above the level of poverty by providing them increased selfemployment
opportunities and making them credit worthy. It is observed that providing credit to the poor
helps in income generation from business and reduce shocks such as illness of a wage earner, weather,
theft, or other such events. It also provides attendant benefits on food security child’s education etc. The
paper focuses on micro finance and its role in promoting the rural poor.