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Contribution of Microfinance Sector to India's Gross Value Added likely to grow According to a recent study by the National Council of Applied Economic Research (NCAER), the contribution of microfinance to India's Gross Value Added (GVA) is likely to increase. According to a study by NCAER, the microfinance sector contributed about 2% to India's GVA in the year 2018-19 and about 5.5% to the entire financial sector. GVA is a method of measuring the productivity of an economy. Microfinance refers to financial services provided to low-income individuals or groups. These people or groups are usually deprived of traditional banking services. The Malegam Committee (2011) helped establish the microfinance sector as a legit asset class (legal asset class). Delivery Model of Microfinance in India: Self-Help Groups (SHGs) Bank Linkage Program (SBLP): The history of the microfinance movement in India can be traced back to the SHG-Bank Linkage Program. It was started as a pilot project by NABARD in the year 1992. Micro-finance Institutions (MFIs) such as Non-Banking Financial Companies (NBFCs), Cooperatives etc. are regulated by the Reserve Bank of India. Bank partnership model Banking correspondent Importance of Microfinance: Due to this, women empowerment has been encouraged by giving loans directly to women. This has increased the status of women in the family, community and society at large. It promotes financial inclusion to enable poor and low-income households to come out of poverty, increase their income levels and improve overall living standards. Loans are provided to the poor without any collateral. It also helps in employment generation. Challenges of Microfinance: The borrowers owe a lot of debt. The interest rate is comparatively very high. Microfinance institutions are heavily dependent on commercial banks for their funds. Source – The Hindu Download Our App MORE CURRENT AFFAIRS

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Contribution of Microfinance Sector to India’s Gross Value Added likely to grow

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