Micro Credit Needs More Than A Policy

Bankers have several misconceptions which need to be dispelled, says Ravinder Yadav

Micro credit has come to stay as an effective tool for alleviating poverty in the developing world. Its benefits far outweigh those of most anti-poverty schemes. The Reserve Bank of India has sought follow-up action on micro credit guidelines which it had earlier circulated among banks. The recent monetary policy has also proposed the creation of a fund of Rs 100 crore to provide start-up support for micro finance institutions.

It is a step in the right direction. However, the guidelines issued by RBI are open to interpretation. Success (or failure) of the policy lies in the way the guidelines are understood and implemented. This calls for close examination of the basic issues.

 

Bankers are new to micro credit as a concept. The RBI defines micro credit as