Globalisation, growth, impact and development of micro finance institution in India

While financial services in India can be traced to the era of Kautilya in the fourth century BC the age of organized sector finance in India is generally acknowledged to have started with the Cooperative Credit Societies Act of 1904. The cooperative credit societies were based on the models of the German cooperative movement, in particular the Raiffeisen and the Schulze-Delitsch cooperatives. The objective of the Act was “to facilitate promotion of cooperative societies, for the promotion of thrift and self-help among agriculturists, artisans and persons of limited means.” To the extent that the wording of this objective could be applied tothe objects of many MFIs today, this Act is a true precursor to modern microfinance in the country.1The true expansion of financial services in India started with the nationalization of all banks in the country during the late 1960s. This was reinforced with the establishment of Regional Rural Banks (RRBs) in 1976,and directed credit became the mantra of the Indian financial sector. In the meantime, the cooperative sector infrastructure had developed through the creation of an apex banking structure at the district and state levels to ensure the smooth flow of capital in the cooperative system. Yet, the entire network of primary cooperativesin the country and the RRBs, established to meet the needs of the rural sector in general and the poor inparticular, has not proved to be successful. The cooperatives suffered from mismanagement, leadership by the privileged, and corruption, and were gradually smothered by state patronage and protection, in many cases including management by ill-motivated government-appointed persons. This article aims on the analysis of micro finance institutions in the development of Indian Economy in global perspective.