India the second largest populated country has agriculture as the livelihood of over 60% of the population, consequently leading to underemployment and low income per capita. In a developing country like India, most of its populace reside in the rural area and lacks facilities and infrastructure, exposure to knowledge, and also have a minimum amount to meet their basic requirements as the income earned by them is quite low. The role of microfinancing is vital among the rural population, small businesses, and imminent entrepreneurs with innovative plans. In the case of rural dwellers, they have limited access to institutionalized credit hence microfinancing provides them with stability concerning their financial needs.
Microfinance is all those financial services such as savings account, insurance funds, credit provided to the lower-income strata to help them increase their income and savings. These loans are provided without collateral, which makes it accessible to a wider audience. The focal point of microfinancing is women, by granting them loans. It makes an effort to empower women by making them financially independent to be able to confront gender inequalities and contribute to their families. Microfinancing is more like a public policy to alleviate poverty, bring about a social change, and enrich the status of women in our country and make them self-reliant. For instance, Kudumbashree in Kerala has elements of microcredit, entrepreneurship, and empowerment, having a development society with several SHG (self-help groups). Kudumbashree was launched in 1997, to uplift poverty-ridden through community action.
The COVID pandemic has greatly affected the Microfinancing Institutions (MFIs), but even then, MFIs are actively conducting virtual group meetings and devising a plan of action to help the rural community pave its way out of this crisis. They are constantly reaching out to people and explaining the need to stay safe, follow hygiene, and reassuring the necessary financial support and waivers. In this crisis, payments might be delayed, loan tenures might get extended, certain waivers are expected as irrespective of sectors, everyone is equally affected with limited cashflows. Financial provisions will be incorporated when the lockdown eases. NBFC-MFIs will be ready to provide financial advice to rebuild lives and additional credit support, given RBI’s and the government’s priority in ensuring liquidity, the lending banks will extend support.
