Abstract :
This paper reviews the achievements of the ‘microfinance revolution’, through
reference to the now extensive literature. It finds that there are many opportunities to
improve and innovate. To illustrate this finding, the paper concentrates on
examining what we need to know to design and deliver better financial products to
the poor, especially the poorest. Microcredit is the extension of very small loans
(microloans) to those in poverty designed to spur entrepreneurship. Microcredit is
based on different set of principles, which are distinguished from the general
financing or credit. Microcredit emphasizes building capacity of a microentrepreneur,
employment generation, trust building and help to the micro
entrepreneur on initiation and during difficult times. This paper has discussed about
the Microcredit which was introduced in India during eighties. It had a great impact
to the urban poor community since they were not considered “creditworthy” enough.
In such a scenario, microcredit came as a blessing because micro-credit institutions
lend small sums of money at a reasonable interest rate without any collateral to
people who need it the most which led to the development of this financial innovation
in India. This paper also discusses about the welfare effects of microcredit, which
plays an important role for the social and economic development of the country such
as reduction of vulnerability, formation of micro clusters, to eradicate poverty, child
labour, helps in skills training, women education and empowerment, creation of
wealth and assets and alleviate the rural masses from the clutches of poverty hence
improving their standard of living.
