Over the last few decades that microfinance has been involved with raising awareness about financial transactions and proper savings, particularly among the mostly uneducated rural populace, MFIs have become an integral and crucial part of India’s growth story. Not only have MFIs helped in reaching people in the most interior parts of the country, the ease of formalities has also given microfinance an edge over formal banking channels.

Now that microfinance has proven its viability as a business model, besides its ability to reach out to a significant section of the population, who have been left out of the financial mainstream for years, the financial platform has emerged as a relevant and important catalyst for providing financial services to those who have been hitherto overlooked by former banking channels. While the Central government’s thrust on including almost every Indian within the ambit of banking has helped increase financial literacy, much still needs to be done, given the size of the land and its large population.

While microfinance has a crucial role to play in this, MFIs have already been helping to take formal credit support to rural people, particularly women. In most cases, banks have tended to bypass this population for decades because of the inherent vulnerability of the customer base, with a number of risks involved, including natural calamities. MFIs, however, have addressed these risks head on and have reached households, which were hitherto deprived of a formal credit line. With MFIs mostly dealing with women, either with existing enterprise or with skills to launch their own enterprise, the rate of return is often much higher than even in formal banking channels.

Financial analysts believe that the key areas where MFIs should focus in order to have a stable and prudent growth of the overall sector is to continue playing its role as an agent of change by further pushing for financial inclusion, besides strengthening credit discipline and repayment, making more out of its operational costs through use of technology, and by strengthening its commitment towards self-regulation. Taking care of these issues, which are already being addressed by those in the sector, can lead to the inclusion of every Indian, who needs financial services. Instead of just resting on their laurels, MFIs should continue to take steps that would help them become a significant force within the financial sector, in the process helping the nation to decrease economic disparity and move towards further development.