A Study of Performance of Microfinance Institutions in India : Rise of Microfinance Institutions and Self Help Groups

Microfinance is an economic development tool whose objective is to assist the poor to work their way out of poverty. It covers a range of services which include, in addition to provision of credit, many other services such as savings, insurance, money transfers, counselling, etc. - Committee Report-2011, RBI. The development in Microfinance in India can be time lined into two phases. In Phase II, the formal financial bodies in India also joined this movement. High cost of mobilization, interest rates regulations, high transaction cost are the reasons which prevents banks to enter into rural India directly. From the experiences of developed countries, it is found that Self Help Groups are the best alternative to reach to rural customer and provide financial services to them. Although Self Help Gropus are working since last two decades in India but still exist a regional disparity in penetration of microfinance. It is also observed that after 2010, there has been decrease in the number of SHGs and MFIs.The study also shows that women are taking active participation in the Self Help Group bank linkage programme and their share is continuously increasing.