Ex- President A.P.J Kalam dedicated his book“India 2020: A Vision for the New Millennium” to a young girl whom he met on his travels across India. When asked, “What is your dream?” the young girl replied “I want to live in a developed India”. Kalam has rightly said that “A developed India by 2020, or even earlier, is not a dream anymore. It need not be a mere vision in the minds of Indians. It is a mission we can strive for, and succeed at. But it’s only possible if we target to uplift the poorest of the poor.”
India is a developing country with 26.1% of our people living below the poverty line. The meaning of development is betterment and amelioration in each and every aspect of a citizen’s life, whether it is standard of living or infrastructure, employment or education or health and hygiene.
As India prepares herself to become an economic superpower in 2020, it must expedite socio-economic reforms and take steps to overcome institutional andinfrastructural bottlenecks, in order to help even the underprivileged sections of society reap the benefits. Now the question that arises, is, even though our government is spending a lot of money on different programs, why does it still seem unrealistic to achieve Vision 2020.
A recent survey reveals about 57% of the poor still borrow from informal sources like money lenders, and 87% doesn’t have access to formal sources. The economically backward classes (ie those below the poverty line) struggle to procure even basic amenities, and there is no way they can have surplus money to invest in their businesses or wellbeing.
As a result, they look for hand loans from traditional money lenders, because of which they get even poorer and poorer by paying interest for these hand loans. The formal banking sector hesitates to provide loans to them as their loan amount is too small to justify the transaction cost and administrative documentation.
This problem has been addressed by the emergence of a new approach to create rural financial infrastructure, which takes formal banking to rural India, and reduces transaction costs for both the banks and the poor. Micro-finance started becoming popular in India after Muhammad Yunus, the founder of the Grameen Bank, bagged the Noble Prize for successfully implementing the micro finance concept in Bangladesh.
Micro finance means providing very poor families with very small loans (micro credit) to help them engage in productive activities or grow their tiny businesses. The typical micro finance clients are low-income persons, typically self-employed, and often household-based entrepreneurs who do not have access to formal financial institutions. In rural areas, they are usually small farmers and those who are engaged in small income-generating activities such as food processing. In urban areas, micro finance activities are more diverse such as shopkeepers, service providers, street vendors, etc. A number of micro finance institutions like SEWA, BASIX etc, are working for upliftment of rural poor. Micro finance gives hope to our macro vision that India will get counted amongst the developed nations by 2020.
This blog post is written by Lalatendu Mishra, Manager Analytics in Brandscapes Worldwide.