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Conditions in Which Microfinance has Emerged in Certain Regions and Consequent Policy Implications

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  • Sriram M S
  • Kumar Radha

Abstract

The paper looks at some macro data on the availability of infrastructure, economic growth, density of population and the availability of formal financial services to examine if any of these factors explain the growth of microfinance in certain regions, while the other regions lag behind. For the study, data from the four southern states and three states from the western part of the country have been examined. We find that most of the indicators are not significant enough to explain the regional disparity in the growth of microfinance. However, anecdotal evidence and a perusal of the state policy pronouncements explain that the role of the state could be significant in promoting some of these initiatives. In case of Karnataka, we also find that the banking system seems to have played an additional role in rolling out microfinancial services. The paper concludes by indicating that possibly the sector is still insignificant in the rural economy to establish causality with macro variables. However, there could be possibility of growth in states like Rajasthan where most of the parameters that could foster microfinance seem to exist and with policy intervention on the routing of developmental projects, the movement could get a big boost. We also indicate that the existing network has the potential of unleashing more finance and financial products, and that initiative should be seized forthwith.

Suggested Citation

  • Sriram M S & Kumar Radha, 2005. "Conditions in Which Microfinance has Emerged in Certain Regions and Consequent Policy Implications," IIMA Working Papers WP2005-05-03, Indian Institute of Management Ahmedabad, Research and Publication Department.
  • Handle: RePEc:iim:iimawp:wp01885
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    Cited by:

    1. Anurag Priyadarshee, 2016. "Microfinance and Poverty Reduction: Is Social Protection the Missing Link?," Journal of Development Policy and Practice, , vol. 1(1), pages 35-52, January.
    2. Sougata Ray & Sushanta Mahapatra, 2016. "Penetration of MFIs among Indian states: an understanding through macro variables," International Journal of Development Issues, Emerald Group Publishing Limited, vol. 15(3), pages 294-305, September.
    3. Annabel Vanroose, 2008. "What macro factors make microfinance institutions reach out?," Working Papers CEB 08-036.RS, ULB -- Universite Libre de Bruxelles.
    4. Jae Min Lee & Narang Park & Wookjae Heo, 2019. "Importance of Subjective Financial Knowledge and Perceived Credit Score in Payday Loan Use," IJFS, MDPI, vol. 7(3), pages 1-21, September.
    5. Kuriakose, Francis & Joseph, Janssen, 2020. "Microfinance and Human Development in Kerala," MPRA Paper 98393, University Library of Munich, Germany.
    6. Sunil Sangwan & Narayan Chandra Nayak, 2019. "Do outreach approaches differ between Self-Help Group-Bank Linkage and Microfinance Institution-based microfinance? Evidences from Indian states," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 21(1), pages 93-115, June.

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