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Microfinance and the Poverty of Financial Services: A Perspective from Indian Experience â€

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  • Sanjay Sinha

    (EDA Rural Systems Private Limited, Gurgaon, India)

  • Meenal Patole

    (EDA Rural Systems Private Limited, Gurgaon, India)

Abstract

The vast network of banking and co-operative finance institutions in India has failed to provide low-income families with significant access to financial services. In this situation, the non-governmental microfinance institutions have attempted to provide an alternative to the high-cost informal financial services that most low-income clients must rely on. The extent to which such service provision is appropriate is discussed in this article using information from the financial histories of low-income families in the slums of Delhi and two villages of one of the more economically backward areas of India. The analysis in the article shows that the needs of low-income clients would be best served by highly flexible financial services that enable the conduct of frequent transactions both for small savings and for borrowing at irregular intervals. In relation to this, both microfinance and formal financial institutions do not fully meet the needs of low-income families. The article concludes with practical suggestions for the design of products and delivery systems to meet these needs.

Suggested Citation

  • Sanjay Sinha & Meenal Patole, 2003. "Microfinance and the Poverty of Financial Services: A Perspective from Indian Experience â€," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 4(2), pages 301-318, September.
    • Handle: RePEc:sae:soueco:v:4:y:2003:i:2:p:301-318
    DOI: 10.1177/139156140300400207
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    1. World Bank, 2001. "World Development Report 2000/2001," World Bank Publications - Books, The World Bank Group, number 11856, April.
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    Keywords

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    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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