A STUDY ON PROBLEMS AND PROSPECTS OF MICRO FINANCE IN KARNATAKA – An overview

Abstract

This paper studies microfinance as a unique economic development tool that was introduced to support low-income families and women who aim to work their way out of poverty and its challenges and prospects. The microfinance industry in India, which has helped to bring financial inclusion in India in 2005 by the RBI providing basic no-frills banking accounts for making and receiving payments and other financial products to millions of rural families and women. MFI has become a dominant player when it comes to extending smaller credit limits, with Karnataka alone seeing 1 crore loan accounts with a portfolio of Rs.46000 crores outstanding as of March 2023, as per a report by the Association of Karnataka microfinance institutions, the loan portfolio of microfinance institutions stood as 3.48 lakh crores with 7 crore borrowers.
The sector has also been serving a crucial purpose in the Indian economy, which has been driven by many factors. Meanwhile, the Govt of Karnataka and RBI have been closely examining the sector to protect borrowers and lenders as a high level of financial risk is involved. Karnataka stands fifth in the country in the share of clients who opt for microfinance lending at the end of March 2022 the state had 9.4 million loan accounts covering 5.4 million unique clients as per the report by NABARD, the districts of Mysuru, Belagavi, and Tumakuru, Mandaya and Hassan were on top in terms of the number of loan accounts held with MFI’S.