Microfinance in India : Sectoral Issues and Challenges

The first thing to remember is that in India the history of rural credit, poverty alleviation and microFinance are inextricably interwoven. Any effort to understand one without reference to the others, can only lead to a fragmented understanding. The forces and compulsions that shaped the initiatives in these areas are best understood in context of State and banking policy over time. Thus, for e.g., there were peasant riots in the Deccan in the late 19th Century on account of coercive alienation of land by moneylenders. The policy response of the then British Government to this problem of rural indebtedness was to initiate the process of organization of cooperative societies as alternative institutions for providing credit to the farmers as also to ensure settled conditions in the rural areas, so necessary for a colonial power to sustain itself.