India’s Rural Financial System: Does it Support Pro-Poor Innovation?
AbstractFrom the perspective of poverty alleviation, socially relevant, or pro-poor, rural innovation is of particular interest in a country like India since it is in rural areas that most of the poor live. Pro-poor innovation in rural areas is more likely to occur through small-scale ventures and entrepreneurs than industrial research and development. The Indian banking system does not efficiently support such rural pro-poor entrepreneur-based innovation. Instead a pioneering alternative financing sector has been emerging recently. There are three broad categories of organisations in this sector: grassroots innovators and incubators, micro venture capital firms, and small-scale financiers beyond microfinance. This paper considers why the core of India’s financial system, its banking sector, does not support rural entrepreneur-based innovation. It ends by discussing the emerging alternative financing sector at the periphery which on the other hand appears able to do so.
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Bibliographic InfoPaper provided by United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT) in its series MERIT Working Papers with number 039.
Date of creation: 2010
Date of revision:
Pro-poor finance; finance innovation; finance entrepreneurship; financial innovation; rural finance; India; India’s financial system.;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies
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