The era of micro-loans in India
The concept of microfinance originated in the 1970s, when banking entities like the Grameen Bank of Bangladesh, under the leadership of Muhammad Yunus, often known as the pioneer, began to develop microloans for the poor and the poor. needy.
In India, microfinance has its roots in the NABARD form which was developed by drawing inspiration from microfinance reforms in Bangladesh. In addition, micro-finance was also developed for rural and women’s development through the SEWA (Association of Independent Women) in Gujarat, in 1974.
Several other associations of this type then developed to provide loans that were easy to obtain and required minimal documentation. It was understood that micro-loans or micro-finance was an important tool in uplifting the weaker sections of society, thus contributing to the escalation of the growth indicators of the Indian economy.
What started in the 1970s as a microcredit system that provided benefits to several people in India, slowly evolved into a “financial system” mechanism that enabled everyone from rural to rural people. urban, to access the microcredit system in India. This financial system was not only limited to banking entities and NGOs, but spread to non-bank financial entities which developed a strong mechanism to provide loans requiring minimal documentation with no lower limit for the loan amount required.
With the current scenario of economic growth in India, banks are reluctant to extend loans to the economically backward part of society due to the higher risks. But this is not the case with the micro-loans offered by non-bank financial groups which offer easy and hassle-free loans online.
The process is fully automated and with the help of the application of machine learning in the process of obtaining and disbursing loans on these lending platforms, businesses can easily access and analyze the vast digital footprint of borrower by helping them assess the repayment capacity of an individual loan. The technological term for this form of data is “alternative data” which is faster to process, unlike traditional credit score.
Moreover, the high internet penetration and the availability of smartphones have made the Indian public aware of the easy process of obtaining micro loans. Today, neither the lender nor the borrower needs to meet in person to complete a loan application. With the help of technology, the whole process takes place through an automated process without the need for a banking expert to assess documents and data.
On the customer support side, ‘bots’ have been specially designed to respond to all borrower requests with just one click. With this rapid development and digitization, there has been a significant growth in microloans acquired by the common man, be it an individual or an entrepreneur trying to build a solid career.
The main objective that microcredit fulfills for a developing country like India is its ability to promote progress not only of an individual but of the nation as a whole. It enables a person receiving financial support to develop their journey of transformation from job seeker to job provider, which in the long run opens up avenues for thousands of others, thus leading to the growth of the Indian economy.
Micro-credit helps unorganized sectors / businesses to grow without having to wait years to get a loan based on their income levels or savings.
Author is MD India, Branch Finance Personal App