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Beyond Micro Finance: Strategic Shift to Financial Inclusion to Stimulate the Growth of Rural India


  • Sinhgad Institute Business Management, Mumbai, India


Poverty, malnutrition, poor standard of living and various other growth-related issues continue to plague India. This becomes even more shocking when seen in the context of the spectacular transformation of Indian economy over past decade. Despite the recent financial crisis, India has witnessed a growth rate of around 8-9% a year. But this impressive growth story hides within its fold the reality that vast majority of Indians continue to struggle for the daily bread and are deprived of even the most basic necessities.

It is universally recognized that poverty in India stems largely from lack of inclusive growth caused by exclusion of nearly 51 % people from basic financial services.

Over the years, a substantial microfinance system based on self-help groups has evolved in India to alleviate poverty. But, its success is marred by problems of high interest rates, exploitative profit making and regulatory issues. It is now being realized that microfinance, is a short-term solution to financial problems that can be resolved only through access to the entire gamut of finance solutions.

The author recommends that the regulators and policy makers should draw lessons from the international experience in order to ensure that financial reach goes beyond a meaningless number crunching. Increasing financial inclusion requires a multidimensional strategy that has empowerment, participation, private enterprise, policy thrust and local commitment as its corner stones.


Financial Inclusion, Micro Finance, Poverty Alleviation, RBI, SHG

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