Credit Options to the Rural Poor: Microfinance as a Source of Rural Credit in India

Informal sector lenders remain a strong presence in rural India in terms of providing credit facilities in rural India. Farmers and rural poor borrowings from Money lenders and other informal sources of rural credit still significant this sources some extent i.e. 77 percent to 32 percent. In this situation micro finance has emerged as an alternative source of rural credit, microfinance programmes has providing all kinds of banking services, it includes loans, thrifts and insurance services. Sometimes it is working more than financial institutions. In addition to providing financial services MFIs typically provide information related to basic education, health, hygiene, child immunization, disease prevention and environment surely one cannot deny the role of microfinance in poverty reduction as it raises income and consumption of poor households. Around the world 128 million people were received microcredit. The growth of microfinance borrowers in the context of India consist of two dominated models SBLP and MFIs increases from 48.0 to 93.9 million in between 2006-2011years. Major findings of this study explore the relationship between rural credit and microfinance instead of non-institutional sources of rural credit. The impact of microfinance on burden of rural debt is declined sharply, especially moneylenders and other non-institutional contribution in terms of lending to farmers, poor and women borrowings is going to downwards. Well managed and regulated microfinance programmes (particularly rate of interest, forced recovery of microcredit loans) augmented rural sector employment, productivity of non-agriculture sector, establishment of MSMEs, empowerment of women in socioeconomic aspects, it enhances health and educational facilities. Another important impact of microfinance programmes is that reduction of income and consumption disparities, especially vulnerable sections of the society will get the benefits from collateral or guarantee free. Microfinance programmes implies that the consumption pattern, it encourages from non-productivity expenditure to productive expenditure because of timely repayments of loans.