Microfinance is a term used for the foundation of monetary services for entrepreneurs and small businesses. This is used with the deficient connected with banking and other associated services. The 2 key systems for the discharge of monetary services to such customers embrace ‘relationship-based banking’ for individual entrepreneurs and small businesses together with ‘group-based models’ wherever many entrepreneurs come together to use for loans and different services as a group.

Similar to banking operation traditions, microfinance entities are speculated to charge their lender’s interests on loans. In most cases, the supposed interest rates are under those charged by traditional banks, but rivals of this idea accuse microfinance entities of making gains by manipulating the poor people’s cash.

As per the globe Bank estimates, quite five hundred million individuals have improved their economic conditions via microfinance-related entities. Microfinance is a vital topic for IAS communication and is enclosed beneath the GS-II section of the UPSC information.

Let’s check out the maximum information regarding microfinance institutions UPSC for the UPSC exam. This exam is extremely important for those putting in the effort to serve the nation. You should do proper UPSC preparation to achieve your target. So, let’s begin with the information.

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Microfinance Institutions UPSC

To get complete knowledge about this significant topic, you should first understand the history of microfinance. If you are aware of the beginning of this term, you will be able to answer perfectly in the paper. The history of microfinance is often derived back to the middle of the 1800s.

Throughout the 1800s, the advantages of small credits to entrepreneurs and farmers was written by Lysander Spooner, the intellect, as to how to urge individuals out of financial crisis and poverty. Later, the primary cooperative loaning bank was founded independently by Friedrich Wilhelm Raiffeisen to support the farmers in rural Germany.

The term “microfinancing” was initially utilized in the Seventies throughout the event of Grameen Bank of Bangladesh, which was based on the microfinance pioneer, Muhammad Yunus. In 1976, Yunus institutionalized the approaches of microfinance, together with the inspiration of Grameen Bank in Bangladesh.

Since, within the developing countries, an outsized range of individuals still depends mostly on farming or basic food trade for his or her living, therefore, farmer agriculture in these developing countries has been supported by the many resources.

UPSC Notes for Microfinance in India

Well, being an aspirant of the officer in India, you must be completely aware of the relation and impact of this term in the country. Lack of security and high operational prices are a number of the main limitations featured by the banks when providing loans to poor folks. These limitations led to the event of microfinance in India as another way to supply loans to the poor with an aim to form money inclusion and equality.

SEWA Cooperative Bank was initiated in 1974 in Ahmedabad, Gujarat, by ELA Bhatt which is currently one of the primary contemporary microfinance establishments of the country. The commercial bank for Agriculture and Rural Development (NABARD) offered money services to the unbanked folks, particularly women, and later set to experiment with a very totally different model, that is currently popularly called self-help groups (SHGs).

The SHG-Bank linkage program in India has savings accounts with seven.9 million SHGs and involves the participation of regional rural banks (RRBs), commercial banks, and cooperative banks in its operations. The origin of SHGs in India may be derived back to the institution of the Self-employed Women’s Association (SEWA) in 1972.

Furthermore, a loan of $144 million was provided by Grameen Capital India in 2013. This was offered to the microfinance groups. This offer was provided to the groups but a few were excluded including the Grameen Bank and another microfinance organization named Equitas. This was developed in Tamil Nadu. The Southern and Western states of India are those attracting the best variety of microfinance loans.

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Mudra Scheme for UPSC Preparation

You must gather complete knowledge about this scheme to answer well in your UPSC exam and achieve your goal of serving the nation. This scheme is of utmost importance for you to acknowledge and understand because questions related to this scheme can be asked in the preliminary round or in the interview.

The central government had introduced the small Units Development finance Agency (MUDRA) wherever the scheme aims to finance collateral-free loans of up to Rs ten lakh granted by loaning entities to non-corporate little borrowers, for revenue growth actions within the non-farm sector.

Currently, loans granted beneath this method have fallen beneath 3 classes particularly, Shishu loans for up to Rs fifty thousand Kishor loans in an exceedingly vary between Rs fifty,001 to Rs five lakhs and Tarun loans starting from Rs five lakhs to ten lakhs. As some way to form the gesture theme common, the government aims to line up a Rs 3000-crore Credit Guarantee Fund to back these loans.

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Well, microfinance is a crucial term because according to the facts, over 500 million people have enhanced their economical state by applying it. Moreover, as of 2014, over 130 million have been directly benefited by operations related to microfinance as stated by IFC, International Finance Corporation. IFC has worked for thirty nations to upgrade their economic status and credit reporting bureaus.

You must be aware that by combatting all the challenges, microfinance operations have become a source of capital for the people in different nations. These operations also empower women in particular, which may lead to more stability and prosperity for families.

Therefore, this term has multiple advantages related to it. An aspirant of the UPSC exam must be aware of the complete benefits and information related to this topic. You can visit the UPSC Pathshala website to gather maximum information related to different topics for the UPSC preparation.

Well, your scores depend upon the dedication and wisdom you put in the preparation because the well you prepare, the well you perform. So, you should reach out to the best platform to fetch the best information for the most prestigious and toughest examination.

You can prepare through the website by taking lectures of the experts and professionals. Also, you can ask your queries to the experts by typing them in the comment section below.

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Shruti Rag

Shruti is a creative and enthusiastic content writer along with being a budding journalist. She is a genuine-hearted and exploring girl with a dash of millennial approach. Her love for speaking and writing has made her pursue her bachelor's in journalism and mass communication. She believes in the quote, "if you will never fail in life, you will never rise like a phoenix from its ashes''. She gives strengthening and positive paths to the students by her content. Her interest lies in reading, traveling, and singing. Innovations and realism let you discover your identity. She has faith in wisdom and determination to touch the skies.

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