Microfinance in India plays an important role in delivering credit to people at the bottom of the economic pyramid. Owing to its grass-roots level connect, it is able to support income-generating activities and impact livelihoods in both rural and urban geographies. Furthermore, microfinance acts as a potent tool for empowering women who constitute the largest part of its borrower base, according to the Reserve Bank of India’s September 2020 report, Microfinance: Reaching out to the Bottom of the Pyramid.
Microfinance loans are of small amounts, with short tenures, extended without collateral and the frequency of loan repayments is greater than that for traditional commercial loans. These loans are generally taken for income generating activities.