Vol: 1, Issue: 4 2011

Page: 71-84

Micro-Credit Market in India: A Study Based on the Report of Planning Commission and the Eleventh Five-Year Plan

Dr. Rajeev Kumar Agrawal

Received Date: 2011-10-15

Accepted Date: 2011-11-13

Published Date: 2011-12-14

This paper is descriptive in nature and tries to understand organised and unorganised micro-credit market in India. It explores the hurdles of the flow of credit to the poor. Despite wide network of rural bank branches poor could not be brought under financial inclusion. It talks about interest rates and reliability, recovery risks and cost of funds to MFIs. The microfinance institutions reach roughly one fifth of the poor households. It is considered that MFIs charges a higher rate of interest than formal banks but the rates charged by them are not higher as they provide credit services and many other services at the door step of the poor. It is concluded by the M-CRIL that 24% interest rate is a reasonable one for MFIs to charge from clients to make MFIs economically viable and sustainable.

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