Micro finance institutions PDF
Added on 2019-12-03
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Literature Review
Table of ContentsLiterature Review.............................................................................................................................1a. Importance and growth aspects of micro finance institutions................................................1b. What is economic downturn as well as its impact upon the economy and micro financeinstitution.....................................................................................................................................4c. Interrelationship between the global economic downturn and growth of micro financeinstitution.....................................................................................................................................8REFERENCES..............................................................................................................................10
Literature ReviewLiterature review represents the theoretical analysis of secondary data sources. In this,researcher critically evaluates the books, journals and research paper to find out valuable insightin relation to the subject matter (Goudarzi and Ramanarayanan, 2011). It provides moreassistance to the researcher in accomplishing the research in an effective manner. In addition tothis, it also develops understanding about the subject area along with their advantages anddisadvantages. It acts as a guide which helps the researcher in getting depth knowledge about thetopic. Micro finance institutions can be defined as a those institution who offers financialassistance to the lower income group at very concessional rates. Micro finance institution plays asignificant role in the growth and development of the economy. This literature review aims at toevaluate the economic down turn at global level in the recent past. Besides this this, it alsocritically assess the potential growth of micro finance institutions in Mysore. Along with it, italso critically discuss the relationship between global economic downturn and growth of microfinance institution in Mysore. a. Importance and growth aspects of micro finance institutionsMicro finance institutions refer to those institutions which provide financial assistance tolower income group or segment of the people. They offer financial services to the entrepreneurand small sized business organization which are unable to approach bank to meet their financialrequirements. It includes credit union, commercial bank, cooperatives and other governmentinstitution who offers loan, depository and other financial services to the customers (Karlan andValdivia, 2011). Cooperative banking can be defined as a retail banking institution which takesdeposits and offers lending facilities in most part of the world. Cooperatives work on the basis ofthe different values such as self responsibility, equality etc. In addition to this, credit unions are termed as nonprofit financial cooperatives who offersavings, credit and financial services to their members. It is the group of people who belong tospecific community, religion and place of employment. In this, each member of the groupdeposits fixed amount in union as per the predetermined norms (Kothari, 2010). Besidesdeposits, it also renders lending facility to members of the group at very concessional rate ascompared to the other sources of funding. Along with it, repayment loan system of credit unionis also very simple as compared to the other financial institutions. 1
As per the view point of Peters and et.al. (2012) micro finance institution helps poor andunemployed people which further contribute in reducing the rate of the poverty. In the present scenario, micro finance institutions play a significant role in promoting theeconomic development. This statement is argued by that it is not necessary that financialassistance provided by micro finance institution contribute in the economic development.Growth and economic development of the country highly depends upon effective concept,strategies and policies framed by the entrepreneur. For example: If entrepreneur fails to makeoptimum utilization of finance which are provided by the micro institutions then growth anddevelopment aspects in negatively affected. Thus, it is very difficult for the financial institutionto assess that which investment gives positive result or not. According to Kothari (2010) micro finance institution also contributes in economicgrowth by supporting the entrepreneur and small sized organizations. Micro finance institutionoffers financial support to the entrepreneurs at very concessional rates as compared to otherfinancial institutions. Through this, micro finance institution encourages the entrepreneur tothink unique or something different. By providing financial services, micro financial institutionprovides opportunity to the entrepreneur to implement their new ideas and strategies. Throughthis, entrepreneur also assists in raising standard of living of the people. In addition to this,micro finance institution also plays crucial in development of sector such as agriculture and otheraspects. Due to lack of the sufficient fund farmers are unable to produce grains by taking intoconsideration the most effective and innovative techniques. In this condition, micro financialinstitutions provide assistance to the farmers by fulfilling their financial needs and requirementsat the cost effective rates. Prosperity of the country is highly dependent upon agricultural aspects.In addition to this, micro finance institution secures farmers and rural people from theexploitation of money lenders. However, it is to be critically evaluated by the Peters and et.al.(2012) that still there are large number of people who take financial assistance from the moneylenders due to the low awareness towards these institutions. As per the view point of another Venkatesh and Vanishree, 2014 micro financeinstitutions encourages rural people to save their money. By introducing attractive rate of intereston the deposits micro institutions can develop the saving habit among the individuals. MFI'splays a vital role in reducing the gap between formal financial institution and rural people. In the2
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