Micro Finance is the supply of loans,savings, and other basic financial service tothe poor .Micro finance means providing very poorfamilies with very small loans (microcredit) to help them engage in productiveactivities or grow their tiny businesses .
The modern micro finance movement dates back to the 1970swhen experimental programs in Bangladesh, Brazil, and a fewother countries began to extend tiny loans to groups of poorwomen to invest in micro enterprises .By lending to groups of women where every member of thegroup guaranteed the repayment of all members, these microcredit programs challenged the prevailing conventional wisdomand proved that poor people without collateral could be "creditworthy". When offered the opportunity, they would repay loanswith interest, at extraordinary rates of repayment.
Evaluation of Micro finance in India :Micro finance has been in practice for ages ( thoughinformally).Legal framework for establishing the co-operativemovement set up in 1904.Reserve Bank of India Act, 1934 provided for theestablishment of the Agricultural Credit Department.Nationalization of banks in 1969.Regional Rural Banks created in 1975.Established as an apex agency for rural finance in 1982.Passing of Mutually Aided Co-op. Act in AP in 1995.
Below Poverty Line 350 million peopleHousehold 75 millionAnnual credit demand 60,000 cororesCumulative disbursements 5000 caroresTotal Outstanding 1600 carores5% of Rural poor have access to micro finance
Bankers feel that it is full risks and uncertainties.High transaction costs.Unfavourable policies.Lack of an appropriate legal vehicle.Limited access to equity.Difficulty in accessing low cost on lending funds.