The microfinance institutions could play a major role in rural development, alleviation of poverty in rural areas and generation of rural entrepreneurship through lending at soft rates, Microfinance Institutions Network (MFIN) Chief Executive Officer (CEO) Alok Prasad told reporters here.
The state government should tie up with the microfinace institutions for providing credit to the rural people at attractive interest rates, he said.
As many as 600 branches of various microfinance companies have been working in Bihar since the past three years as part of the Joint Liability Group (JLG) and has distributed loans to the needy people, Prasad said.
New job opportunities have been created in the rural areas due to expansion of the microfinance companies, while a large number of rural people, particularly youths, have taken up self-employment work by taking loans from these companies, the MFIN CEO said.
Dispelling rumours that the microfinance companies charge exorbitant interest rates in comparison to banks, Prasad said that these companies functioned on the guidelines of the Reserve Bank of India (RBI) with a mission to ensure economic empowerment of the rural people and the interest rate charged by them stood much lower than banks.
The microfinance companies have been a runaway success in Bihar with coverage in 70 per cent in several districts, he said.