Vol. 10, Issue 1, Part A (2024)

The financial system of a country plays a crucial role in promoting economic activity and fostering economic growth. The progress of a nation is not only determined by improved infrastructure and innovative methodologies, but also by its human development index. Microfinance serves as a source of financial services for entrepreneurs and small businesses that do not have access to banks and similar services. Microfinance is emerging as a powerful tool for alleviating poverty in the modern economy. Beyond the obvious correlation with poverty reduction, there is an indirect link to meet the needs of health, education, and sexuality. Microfinance funds may be used for both investment and production loans, as well as for other credit requirements such as housing and shelter improvements. Women make up the majority of customers of microfinance lending and investment fund services.

Microfinance is a broad category of services that including microcredit. Microcredit is the provision of credit services to financially disadvantaged clients. Microcredit is a component of microfinance, and the two are often confused. Microfinance has been recognized as a powerful tool for poverty alleviation in India.