Significance of Microfinance in Emerging Economies

Access to microfinance is known to lead to an increase in the income generation capacity of beneficiaries. Micro-entrepreneurship and self-employment have developed continuously during the last few decades, and they have succeeded in creating jobs in low-income countries. Microfinance is playing a vital role in economic development through entrepreneurship development in India and other developing countries like Bangladesh, Indonesia, and Vietnam etc. The success of small business in India depends upon the accessibility of working capital that is supported by small credits provided by financial institutions. These microfinance institutions face considerable challenges, especially during the start-up phase. Also these Microfinance institutions are suffering from many shortcomings that needed to be removed. As currently, the key focus seems to be on credit facilitation which could be profit-driven by developing culture of sound business. The paper provides an overview of the micro finance industry in developing countries. The objective is to summarise and highlight the key aspects of its status and future challenges.