Abstract
Microfinance is not merely a financial system but a vital tool for combating poverty and fostering social change, particularly by empowering women to achieve self-reliance. In India, 168 key microfinance institutions function throughout 29 states, 4 union territories, and 563 districts, providing small loans intended to assist individuals in overcoming poverty. This paper explores the conceptual framework of these institutions and examines their role in advancing rural development. By enhancing financial literacy through the analysis of various microfinance schemes, the research underscores the urgent need for effective lending methods to support economically disadvantaged sectors. The broader socioeconomic impacts of microfinance, including its effects on business growth, women's empowerment, and community development, require further investigation to assess whether these programs are delivering on their promise of promoting equitable economic development. The study concludes that microfinance programs are essential for addressing the needs of the poor, enhancing their living standards, and contributing to overall economic growth. Community-based organizations (CBOs) differ from solidarity groups in that they anticipate the eventual graduation of their borrowers from the lending institutions. Consequently, the main role of CBOs is to build the internal financial management capacity of the group, aiming to establish a mini-bank that is independent of the lending institution and entirely owned and managed by the impoverished members.
Keywords: Microfinance, schemes, rural development, Self-Help Groups, credit. Financial Literacy
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