Micro Finance and Support Organisations In the Southern States

Abstract

Since formal credit institutions rarely lend to the poor, special institutional anungements become necessary to extend credit to those who have no collateral to offer. Micro finance (MF), by providing small loans and savings facilities to those who have been excluded from commercial financial services, has been promoted as a key strategy for reducing poverty in all its forms by agencies all over the world, particularly in the developing countries. Micro credit (MC) has been defined as “programmes that can provide credit for self- employment and other financial and business services (including savings, technical assistance, training, networking, and peer support) to very poor persons” (Micro Credit Summit 1997). The task force on supportive policy and regulatory framework for micro finance (NABARD 1999) defined micro finance as “provision of thrift, credit, and other financial services, and products of very small amounts to raise the income levels of clients, and improve their living standards.” While micro credit loans are generally advanced for self-employment projects, they are also sometimes advanced for consumption, repayment of earlier debts, and other social needs as well. It is necessary for micro credit institutions to get the borrowers to make the transition from consumption loans to production loans or loans for income bearing projects. As per the definition of the International Labour Organisation (ILO), micro finance is an economic development approach that involves providing financial services through institutions to low income clients.