In today’s scenario microfinance word has acquired new ramification, which is a set of financial services, includes saving, credit, insurance and remittances aimed to ensure the benefit to the larger disadvantaged section of the society. The work of microfinance doesn’t limits itself here only rather extends to provide some sort of support services like motivating, organizing, linkage and training so as financial services delivered could be used properly.
As the above definition of microfinance suggests, it has two broad scope firstly financial services and secondly support services.
- Financial Services
- Support Services
Twentieth century was full of large-scale deliberate efforts of social change to “improve the quality of life of the disadvantaged society of world. The concept of micro-Finance evolved from the experiences of these efforts. It was felt that making financial services available to the poor is necessary, though not sufficient, condition for improving the quality of their life. However, it was also observed that in spite of establishment of a large network of financial outlets a large majority of the Disadvantaged had no access to formal financial systems. This gap created the scope for microfinance.
Therefore, thinkers concerned with development, in different parts of the world, made a serious effort to make financial services, including savings and credit, available to the disadvantaged. Micro-Finance is a result of the work of such social innovators.
Experience has proved that microfinance can help the poor to increase income, build viable businesses, and reduce their vulnerability to external shocks. It can also be a powerful instrument for self-empowerment by enabling the poor, especially women, to become economic agents of change.
Poverty is multi-dimensional. By providing access to financial services, microfinance plays an important role in the fight against the many aspects of poverty. For instance, income generation from a business helps not only the business activity expand but also contributes to household income and its attendant benefits on food security, children’s education, etc. Moreover, for women, who, in many contexts, are secluded from public space, transacting with formal institutions can also build confidence and empowerment.
Recent research has revealed the extent to which individuals around the poverty line are vulnerable to shocks such as illness of a wage earner, weather, theft, or other such events. These shocks produce a huge claim on the limited financial resources of the family unit, and, absent effective financial services, can drive a family so much deeper into poverty that it can take years to recover.