Abstract
The global microfinance sector is worth over Indian rupees 8.90 trillion along with the loan distribute amount growing at
11.5% on the average annual rate over the last 5 years. 139.9 million Borrowers worldwide were impacted by 80% of the
woman and 65% from rural backgrounds (SIDBI, 2019). In India, the rural population in 2018 was reported at 65.97% and
decreased to 64,61% in 2021 according to the World Bank and 25.7% of this population is living below the poverty line,
with hardly any access to formal banking or any additional financial services and therefore microfinance has a significant
contribution to assist in bridging the gap. While in urban areas, 13.7% of the population is living below the poverty line
(Trading Economics, 2020/2023).
Microfinance on its own does not cause people to get out of poverty, but it does provide them with economic possibilities.
Microfinance is just suitable when there are existing continuing economic activities (CGAP, 2002). Nasir (2013)
established that microfinance causes psychological and social empowerment more than economic empowerment. The two
key hindrances to the growth of micro and small enterprises are not just the lack of financial accessibility but also the lack
of knowledge and innovativeness. According to the World Bank Group, innovativeness is low compare to larger
enterprises. A primary role of the governments regarding micro and small enterprise is to remove their obstructions towards
establishment and growth (Prijadi et al., 2020). Studies determine that access to finance is a huge restriction on micro and
small enterprise growth (Angeles et al., 2019; Beck et al., 2015; Fowowe, 2017). Access to finance is the potential of micro
and small enterprises to make use of financial services like credit and saving.
The current day use of the microfinance concept has its origin in 1976 when Dr. Mohammad Yunus created as part of a test,
a small microfinance scheme in the rural areas of Bangladesh. This test resulted in the achievement of the first microfinance
institution, the Grameen Bank of Bangladesh (Maengwe & Otuya, 2016). The microfinance concept has grown in the past
two decades and expanded across the world. In both developing and developed countries, micro and small enterprises are
accepted as socio-economic and political development motivation (Mbithe, 2013). The augmentation of small enterprises is
vital to economic constancy and expansion, although numerous small enterprises cannot grow and expand because of the
inadequacy of financial help from formal financial institutions (Maengwe & Otuya, 2016; Aldaba, 2012; Beck, et al, 2015;
Fowowe, 2017). This is because micro and small enterprises are incapable to reach the collateral specifications given by
11.5% on the average annual rate over the last 5 years. 139.9 million Borrowers worldwide were impacted by 80% of the
woman and 65% from rural backgrounds (SIDBI, 2019). In India, the rural population in 2018 was reported at 65.97% and
decreased to 64,61% in 2021 according to the World Bank and 25.7% of this population is living below the poverty line,
with hardly any access to formal banking or any additional financial services and therefore microfinance has a significant
contribution to assist in bridging the gap. While in urban areas, 13.7% of the population is living below the poverty line
(Trading Economics, 2020/2023).
Microfinance on its own does not cause people to get out of poverty, but it does provide them with economic possibilities.
Microfinance is just suitable when there are existing continuing economic activities (CGAP, 2002). Nasir (2013)
established that microfinance causes psychological and social empowerment more than economic empowerment. The two
key hindrances to the growth of micro and small enterprises are not just the lack of financial accessibility but also the lack
of knowledge and innovativeness. According to the World Bank Group, innovativeness is low compare to larger
enterprises. A primary role of the governments regarding micro and small enterprise is to remove their obstructions towards
establishment and growth (Prijadi et al., 2020). Studies determine that access to finance is a huge restriction on micro and
small enterprise growth (Angeles et al., 2019; Beck et al., 2015; Fowowe, 2017). Access to finance is the potential of micro
and small enterprises to make use of financial services like credit and saving.
The current day use of the microfinance concept has its origin in 1976 when Dr. Mohammad Yunus created as part of a test,
a small microfinance scheme in the rural areas of Bangladesh. This test resulted in the achievement of the first microfinance
institution, the Grameen Bank of Bangladesh (Maengwe & Otuya, 2016). The microfinance concept has grown in the past
two decades and expanded across the world. In both developing and developed countries, micro and small enterprises are
accepted as socio-economic and political development motivation (Mbithe, 2013). The augmentation of small enterprises is
vital to economic constancy and expansion, although numerous small enterprises cannot grow and expand because of the
inadequacy of financial help from formal financial institutions (Maengwe & Otuya, 2016; Aldaba, 2012; Beck, et al, 2015;
Fowowe, 2017). This is because micro and small enterprises are incapable to reach the collateral specifications given by
| Original language | English |
|---|---|
| Title of host publication | Innovation and Global Issues with Multidisciplinary Perspectives |
| Number of pages | 7 |
| Publication status | Published - 2018 |
| Externally published | Yes |