Vol. 2, Issue 10, Part K (2016)

Abstract
Microfinance is gaining importance worldwide as an important measure to alleviate poverty and improve the socio-economic condition of the poor, marginalised and the deprived section of the country. The microfinance sector in India has progressed very well and contributed to the economic upliftment of the people. SHGs and MFIs both are working towards fulfilling the financial needs of rural and urban poor. However, due to some challenges the growth and spread of microfinance system have been obstructed. India can take some lessons from Bangladesh, the pioneer in the microcredit system on how to make microfinance an effective tool in fulfilling the financial needs of the poor, along with promoting the economic growth of the country and welfare of the people. The paper analyses the structure and growth of the microfinance system in India and the challenges faced. It makes an attempt to provide suggestions for enhancing the efficiency of the microfinance system.