Context: Microfinance institutions have urged the Centre to consider prioritising vaccinations for their employees and self-help group workers in order to ensure that lines of credit remain open for the poor amidst the rising second wave of COVID-19 infections.
- It is necessary that these frontline workers are prioritized in Covid vaccination so they could keep up their services without any fears and apprehensions.
What are Microfinance institutions (MFI)?
- A microfinance institution is an organization that offers financial services to low income populations.
- Almost all give loans to their members, and many offer insurance, deposit and other services.
- MFIs are financial companies that provide small loans to people who do not have any access to banking facilities.
- The definition of “small loans” varies between countries. In India, all loans that are below Rs.1 lakh can be considered as microloans.
- A great scale of organizations is regarded as microfinance institutes. They are those that offer credits and other financial services to the representatives of poor strata of population (except for extremely poor strata).
- MFIs are the pivotal overseas organizations in each country that make individual microcredit loans directly to villagers, microentrepreneurs, impoverished women and poor families.
Various types of institutions offer microfinance: credit unions, commercial banks, NGOs (Non-governmental Organizations), cooperatives, and sectors of government banks.
Significance
- Microfinance is increasingly being considered as one of the most effective tools of reducing poverty by enabling microcredit to the financial poor.
- Microfinance has a significant role in bridging the gap between the formal financial institutions and the rural poor.
- The Micro Finance Institutions (MFIs) accesses financial resources from the Banks and other mainstream Financial Institutions and provide financial and support services to the poor.
- Microfinance sector is serving around 102 million accounts (including banks and small finance banks) of poor population of India.