Microfinance Institutions in India: Issues and Challenges

Abstract

India is one of the developing countries in the world. It is argued that among others absence of access to credit is presumed to be the cause for the failure of the poor to come out of poverty. Lending to the poor involves high transaction cost and risks associated with information asymmetries and moral hazards. Microfinance is one of the ways of building the capacities of the poor who are largely ignored by commercial banks and other lending institutions and graduating them to sustainable self-employment activities
by providing them financial services like credit, savings and insurance.
To provide microfinance and other support services, Microfinance Institutions (MFIs) should be able to sustain themselves for a long period. Therefore, this paper tries to identify the major issues and challenges faced by the Indian microfinance institutions.