Scaling-up Microfinance for India’s Rural Poor
This paper reviews the current level and pattern of access to finance for India's rural poor and examines some of the key microfinance approaches in India, taking a close look at the most dominant among these, the Self Help Group (SHG) Bank Linkage initiative. It empirically analyzes the succes...
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| Format: | Policy Research Working Paper |
| Language: | English |
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World Bank, Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2005/06/5866236/scaling-up-microfinance-indias-rural-poor http://hdl.handle.net/10986/8311 |
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okr-10986-83112021-04-23T14:02:43Z Scaling-up Microfinance for India’s Rural Poor Basu, Priya Srivastava, Pradeep ACCOUNTING AFFILIATE AGRICULTURAL CREDIT BALANCE SHEET BALANCE SHEETS BANK ACCOUNTS BANK BRANCHES BANK LENDING BANK NATIONALIZATION BANKING SECTOR BANKS BONDS BORROWING BORROWING COSTS CAPITAL ADEQUACY CAPITAL REQUIREMENT CAPITALIZATION COMMERCIAL BANKS COOPERATIVE BANKS CREDIT RATINGS CREDIT RATIONING CROWDING OUT DEBT DEBT FINANCING DEFAULT RISK DEPOSITS DEREGULATION EMERGING ECONOMIES EMERGING MARKETS EMPLOYMENT EQUITY CAPITAL EXPENDITURES FINANCIAL ASSETS FINANCIAL DISTRESS FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL SERVICES FISCAL DEFICITS GOVERNMENT GOVERNMENT SECURITIES HOUSEHOLD DEBT INCOME LEVELS INSURANCE INTEREST INCOME INTEREST RATES INTERNAL CONTROLS LENDING RATES LIQUIDITY LIQUIDITY RATIO MARKET VALUE MICROFINANCE NET PROFIT PORTFOLIOS PRIVATE SECTOR PROFITABILITY PUBLIC SECTOR RATING AGENCIES REGIONAL RURAL BANKS REGULATORY FRAMEWORK RESERVE BANK OF INDIA RISK MANAGEMENT SAVINGS SECURITIES SECURITIZATION STREAMS TAX TRADING TRANSACTION COSTS VULNERABILITY WAGES This paper reviews the current level and pattern of access to finance for India's rural poor and examines some of the key microfinance approaches in India, taking a close look at the most dominant among these, the Self Help Group (SHG) Bank Linkage initiative. It empirically analyzes the success with which SHG Bank Linkage has been able to reach the poor, examines the reasons behind this, and the lessons learned. The analysis draws heavily on a recent rural access to finance survey of 6,000 households in India undertaken by the authors. The main findings and implications of the paper are as follows: India's rural poor currently have very little access to finance from formal sources. Microfinance approaches have tried to fill the gap. Among these, the growth of SHG Bank Linkage has been particularly remarkable, but outreach remains modest in terms of the proportion of poor households served. The paper recommends that, if SHG Bank Linkage is to be scaled-up to offer mass access to finance for the rural poor, then more attention will need to be paid toward the promotion of high quality SHGs that are sustainable, clear targeting of clients, and ensuring that banks linked to SHGs price loans at cost-covering levels. At the same time, the paper argues that, in an economy as vast and varied as India's, there is scope for diverse microfinance approaches to coexist. Private sector microfinanciers need to acquire greater professionalism, and the government can help by creating a flexible architecture for microfinance innovations, including through a more enabling policy, legal, and regulatory framework. Finally, the paper argues that, while microfinance can, at minimum, serve as a quick way to deliver finance to the poor, the medium-term strategy to scale-up access to finance for the poor should be to "graduate" microfinance clients to formal financial institutions. The paper offers some suggestions on what it would take to reform these institutions with an eye to improving access for the poor. 2012-06-18T18:48:04Z 2012-06-18T18:48:04Z 2005-06 http://documents.worldbank.org/curated/en/2005/06/5866236/scaling-up-microfinance-indias-rural-poor http://hdl.handle.net/10986/8311 English Policy Research Working Paper; No. 3646 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research South Asia India |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
ACCOUNTING AFFILIATE AGRICULTURAL CREDIT BALANCE SHEET BALANCE SHEETS BANK ACCOUNTS BANK BRANCHES BANK LENDING BANK NATIONALIZATION BANKING SECTOR BANKS BONDS BORROWING BORROWING COSTS CAPITAL ADEQUACY CAPITAL REQUIREMENT CAPITALIZATION COMMERCIAL BANKS COOPERATIVE BANKS CREDIT RATINGS CREDIT RATIONING CROWDING OUT DEBT DEBT FINANCING DEFAULT RISK DEPOSITS DEREGULATION EMERGING ECONOMIES EMERGING MARKETS EMPLOYMENT EQUITY CAPITAL EXPENDITURES FINANCIAL ASSETS FINANCIAL DISTRESS FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL SERVICES FISCAL DEFICITS GOVERNMENT GOVERNMENT SECURITIES HOUSEHOLD DEBT INCOME LEVELS INSURANCE INTEREST INCOME INTEREST RATES INTERNAL CONTROLS LENDING RATES LIQUIDITY LIQUIDITY RATIO MARKET VALUE MICROFINANCE NET PROFIT PORTFOLIOS PRIVATE SECTOR PROFITABILITY PUBLIC SECTOR RATING AGENCIES REGIONAL RURAL BANKS REGULATORY FRAMEWORK RESERVE BANK OF INDIA RISK MANAGEMENT SAVINGS SECURITIES SECURITIZATION STREAMS TAX TRADING TRANSACTION COSTS VULNERABILITY WAGES |
| spellingShingle |
ACCOUNTING AFFILIATE AGRICULTURAL CREDIT BALANCE SHEET BALANCE SHEETS BANK ACCOUNTS BANK BRANCHES BANK LENDING BANK NATIONALIZATION BANKING SECTOR BANKS BONDS BORROWING BORROWING COSTS CAPITAL ADEQUACY CAPITAL REQUIREMENT CAPITALIZATION COMMERCIAL BANKS COOPERATIVE BANKS CREDIT RATINGS CREDIT RATIONING CROWDING OUT DEBT DEBT FINANCING DEFAULT RISK DEPOSITS DEREGULATION EMERGING ECONOMIES EMERGING MARKETS EMPLOYMENT EQUITY CAPITAL EXPENDITURES FINANCIAL ASSETS FINANCIAL DISTRESS FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL SERVICES FISCAL DEFICITS GOVERNMENT GOVERNMENT SECURITIES HOUSEHOLD DEBT INCOME LEVELS INSURANCE INTEREST INCOME INTEREST RATES INTERNAL CONTROLS LENDING RATES LIQUIDITY LIQUIDITY RATIO MARKET VALUE MICROFINANCE NET PROFIT PORTFOLIOS PRIVATE SECTOR PROFITABILITY PUBLIC SECTOR RATING AGENCIES REGIONAL RURAL BANKS REGULATORY FRAMEWORK RESERVE BANK OF INDIA RISK MANAGEMENT SAVINGS SECURITIES SECURITIZATION STREAMS TAX TRADING TRANSACTION COSTS VULNERABILITY WAGES Basu, Priya Srivastava, Pradeep Scaling-up Microfinance for India’s Rural Poor |
| geographic_facet |
South Asia India |
| relation |
Policy Research Working Paper; No. 3646 |
| description |
This paper reviews the current level and pattern of access to finance for India's rural poor and examines some of the key microfinance approaches in India, taking a close look at the most dominant among these, the Self Help Group (SHG) Bank Linkage initiative. It empirically analyzes the success with which SHG Bank Linkage has been able to reach the poor, examines the reasons behind this, and the lessons learned. The analysis draws heavily on a recent rural access to finance survey of 6,000 households in India undertaken by the authors. The main findings and implications of the paper are as follows: India's rural poor currently have very little access to finance from formal sources. Microfinance approaches have tried to fill the gap. Among these, the growth of SHG Bank Linkage has been particularly remarkable, but outreach remains modest in terms of the proportion of poor households served. The paper recommends that, if SHG Bank Linkage is to be scaled-up to offer mass access to finance for the rural poor, then more attention will need to be paid toward the promotion of high quality SHGs that are sustainable, clear targeting of clients, and ensuring that banks linked to SHGs price loans at cost-covering levels. At the same time, the paper argues that, in an economy as vast and varied as India's, there is scope for diverse microfinance approaches to coexist. Private sector microfinanciers need to acquire greater professionalism, and the government can help by creating a flexible architecture for microfinance innovations, including through a more enabling policy, legal, and regulatory framework. Finally, the paper argues that, while microfinance can, at minimum, serve as a quick way to deliver finance to the poor, the medium-term strategy to scale-up access to finance for the poor should be to "graduate" microfinance clients to formal financial institutions. The paper offers some suggestions on what it would take to reform these institutions with an eye to improving access for the poor. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Basu, Priya Srivastava, Pradeep |
| author_facet |
Basu, Priya Srivastava, Pradeep |
| author_sort |
Basu, Priya |
| title |
Scaling-up Microfinance for India’s Rural Poor |
| title_short |
Scaling-up Microfinance for India’s Rural Poor |
| title_full |
Scaling-up Microfinance for India’s Rural Poor |
| title_fullStr |
Scaling-up Microfinance for India’s Rural Poor |
| title_full_unstemmed |
Scaling-up Microfinance for India’s Rural Poor |
| title_sort |
scaling-up microfinance for india’s rural poor |
| publisher |
World Bank, Washington, DC |
| publishDate |
2012 |
| url |
http://documents.worldbank.org/curated/en/2005/06/5866236/scaling-up-microfinance-indias-rural-poor http://hdl.handle.net/10986/8311 |
| _version_ |
1764407596859523072 |