The History of Micro-Credit as a Means for Development of Poor Nations

1632 WordsJul 10, 20187 Pages
The Indian population lacks opportunities such as financial resources and the ability to get jobs. They are stuck in an endless cycle with no opportunities for people to lift themselves out of poverty. Microcredit has been used as a method by governments in developing countries, international funding organizations and donor agencies, in order to help the poor make money since the 1950’s. During the 1950s and1960s, the Indian government started disbursing loans to families in rural areas that worked in the agricultural sector as well as city-dwelling families to promote economic growth throughout India with collaboration with the Indian Government. Households in the agricultural market were divided into three different groups of workers who…show more content…
Competition in urban areas is fierce whereas it is extremely slow in rural areas. With the hope of reaching rural households the government has reduced some of the rules and regulations for banking. Since many banks don’t consider rural communities profitable, they only distribute loans when required by the government. Despite all these efforts, most rural households in India still do not have access to banking. This inhibits them from access to savings and credit. In India it is extremely difficult for the rural poor to get credit. In fact they don’t even have savings account from the formal banking sector. Some urban poor have access to the banking system because of their geographical location whereas most don’t The World Bank (WB) - National Council of Applied Economic Research (NCAER) Rural Finance Access Survey (RFAS 2003) shows that rural banks serve the richer rural clientele. Where, around 66% of large farmers had a deposit account, only 44% had access to credit. 87% of the poorest households mainly the small farmers did not have access to credit, whereas 71% did not have a savings account. It is extremely difficult for the poor to get credit from banks because they lack of collateral and also because of their inexperience in formal finance since they usually borrow money from moneylenders and shopkeepers (informal finance). Out of the
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