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The concept of microfinance in India is not new. Traditionally, microfinance flourished in India as an unorganized sector with private money lenders being the vehicle of loan granters. But this mostly did not lead the people to development/ social upliftment, rather pushed them into the vicious cycle of poverty. The answer to this was microfinance which not only helped them to get small loans but also improved their standard of living.
The present research work examines the contribution of microfinance program in promotion of financial inclusion in urban area thereby examining the prospects, awareness and associated challenges.
Though microfinance programs are run in a well organized manner in the rural areas through MFIs, government programs, banks, etc the urban areas still need a lot of attention. The poor in the urban areas are more or less deprived though their necessities are huge at least not less if not more than the rural areas. The problems associated with urban areas are also different like they do not live in groups / in one area and also they do not know even the people living close to them unlike a rural area which helped them to create groups like a SHG / JLG. An ample amount of literature on microfinance studies the role of microfinance inadvertently in the context of rural poor to the extent that microfinance has become synonymous with rural poverty. The new area that needed to be addressed in this study was that whether individuals can be granted MF loans and working of it’s risk profile. So this paper examines the role of microfinance in urban setting of Kamrup (Metro) district of Assam.
Inclusive growth refers to ensuring that all phases of development (designing, implementation, monitoring, evaluation) include the whole population of economy. The paper evaluates the contribution of microfinance program in promotion of financial inclusion in Urban area of Kamrup (Metro).
The role of microfinance in promoting financial inclusion has been studied by undertaking both quantitative and qualitative methods.
A sample population of 435 constituting both beneficiaries and non beneficiaries from Kamrup(Metro) district of Assam has been studied. A conglomerative index of Financial Inclusion has been used to arrive at the Financial Inclusion status of each respondent. The index has been compared across beneficiaries of microfinance and non beneficiaries so as to come to a conclusion that beneficiaries of microfinance have better financial inclusion status than non beneficiaries.
The extent of association with informal credit markets is considered as having a negative and impinging effect on the aim of financial inclusion which is taken into consideration. So, incidence of informal borrowing in the last three years have been studied and the comparison is done.
The influence of various socio economic factors like occupation, age, income etc on the status of financial inclusion of the respondent has also been studied.
To study the Category II, a research design based on case studies and qualitative research methods was adopted.
A clear association with higher levels of FI index and microfinance membership was inferred. Results indicate that a majority of MF beneficiaries are medium level financially inclusive.
Microfinance has been successful in addressing barriers to financial inclusion to the extent that a skewed geographic growth of Microfinance is observed in the study. There is a need to make under-served areas more attractive for MF providers, for the microfinance sector to play a role in providing financial inclusion. An analysis of the spread of microfinance services vis-à-vis that of banking services revealed the extent to which microfinance programs fill gaps in banking sector services and it was found that Microfinance has made considerable progress in increasing access to Financial services / Financial Inclusion in Kamrup (Metro) where penetration level is relatively low.
KEYWORDS: Financial Inclusion, FI Index, beneficiaries, provider level, SHG/JLG
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