Global Patterns and Future Trends in Micro Finance System

Micro finance is recognized as an effective and financially sustainable tool for poverty reduction both in developing countries as well as in developed countries. It is estimated that nearly 44 million poor households around the world have access to microcredit and there is about 40 per cent increase in this number over the last two years. It implies that there is now an opportunity to bring about a substantial reduction in poverty around the world. However, not all the poor households can make good use of it. Those who are out of income-generating activities, can not be helped out of poverty by a loan. Many other poor households do not have either the entrepreneurial ability and the self-discipline required to make good use of micro credit. The present paper is an attempt to overview the micro finance among the developing countries on the basis of recent innovations that have emerged to facilitate urban poor to be able to enhance their productivity. These innovations include typology of Micro Finance Institutions (MFIs), practice of wholesale financing to improve liquidity of MFIs, application of regulator to evolve simplified norms for accounting and reporting standards of MFIs, development of alternate products to enlarge outreach of micro finance and innovative methods for non-financial services as part of back-up for micro finance to promote training, technology transfer, raw material, marketing facilities and competitiveness. This paper also examines the structure and operations of Swarana Jayanti Shahri Rozgar Yozana and places on records that SJSRY has been successful to put the basic backup for community structures among most urban centres in the country. This is a very healthy sign and can be used for further expansion of micro finance through strengthening of SJSRY in terms of its outreach, utilization of local saving potential, institutional setting, development of alternate products and linkages with city production system. Finally the paper suggests possible focus areas so that SJSRY can play a role model for the micro finance system among the developing countries like India.