Microfinance: A Conceptual Study

Abstract

Microfinance provides the hitherto unbanked and underprivileged persons with access to
loans and other financial products. Microfinance institutions offer a number of services like
microcredit, deposit service, insurance, financial advisory service, etc. to the poor and needy
people. Microfinance has several characteristic features like the absence of physical collateral
security which make it suitable for poor customers. Several unique models including the
group lending model have been developed for the purpose of delivery of microfinance
products to poor customers. Due to the numerous advantages offered by microfinance
products and schemes, it has become popular throughout the world, particularly in third world
countries including India. This theoretical study, through the review of about thirty-four
previous published works, seeks to trace the conceptual development of microfinance.

Keywords: Microfinance, Microfinance Institutions (MFIs), Financial Inclusion,
Microcredit, Group Lending