Micro finance can be defined as the provision of a broad range of financial services such as deposits, loans, payment services, money transfers and insurance to poor and low-income households and their micro-enterprises. Micro finance is a powerful tool for achieving higher levels of financial inclusion in economies. Micro finance is one of the key drivers which affect the financial inclusion. Increased inclusion brings both efficiency and equity benefits. Micro finance is also revealing substantial commercial opportunities and attracting growing private capital flows.
Financial Inclusion is enabling of banking services at an affordable cost to the vast sections of disadvantaged and low-income groups. As banking services are in the nature of public service, provision of banking and payment services to the entire population without discrimination should be the prime objective of the public policy.
Micro finance programmers are intended to reach poor segments of society as they lack access to financial services. It seeks to reach out to the excluded category of population from the banking system. Financial inclusion is not just credit dispensation; it is about connecting the people with the banking system for availing bouquet of financial services including access to payment system.