Role of Microcredit in Rural Job Creation in India


Microcredit was conceptualized in Bangladesh in 1983, when Muhammad Yunus founded the Grameen Bank in order to extend small, low interest rate loans to the rural populace. He wanted to alleviate the poverty of his country's famine stricken people. Since its inception, microcredit has become a more commercialized and profit driven project with the view that even the poor can be banked. With a repayment rate ranging between 90% and 97%, it is now seen as a viable financing for even private banks.

Rooted to explosive population growth, poverty is the biggest challenge India faces presently. More than 40% of its population exists below the poverty line. In this scenario, microcredit can play a key role in bringing about a change. The rural India lacks basic amenities, such as electricity, clean drinking water, nutritious food, medical facilities, and education. They are mostly farmers who are largely dependent upon the weather conditions for their crop yield. Temperamental monsoons and unpredictable weather behavior make a steady income impossible. Without the availability of a structured loan system, it is all too easy for these poor farmers to get into the clutches of local moneylenders who bleed them dry. In order to get out of the cycle of poverty, they need to reduce their dependence upon farming as the only source of income. They need to be encouraged to take up other vocations that can help them when the conditions for farming are adverse. The microcredit institutions can provide various forms of training in vocations that encourage self-employment.

As per the payback records, women, especially, have been more particular. Therefore, they are more dependable for microcredit projects. Home-based individual or group, women owned enterprises are reasonably profitable programs for investments. Microcredit organizations can potentially empower the women in our rural society. When Indian women begin to share the financial responsibilities at home, they tend to have more say in the family matters. This will be a stepping-stone in bringing about gender equality in rural India, where traditional orthodox beliefs are still very much in practice.

An economy needs the infusion of money to spiral up the growth. Microcredit encourages entrepreneurship, which in turn generates employment opportunities. This ensures a steady income. Higher earnings will bring about higher spending capacity and increased demand from the rural areas. The living standards and the literacy rates will subsequently improve. Better education will generate more awareness and the cycle of income will grow. Microcredit is a powerful tool for change at the grass root level. If used sensibly, it can empower the people in rural India.

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