India falls under low income class according to World Bank. It is second populated country in the world and around 70 % of its population lives in rural area. 60% of people depend on agriculture, as a result there is chronic underemployment. Along with poverty, low rate of education, low sex ratio, exploitation results in low production capacity both in agriculture(which contribute around 22- 25% of GDP) and Manufacturing sector. Rural people have very low access to institutionalized credit (from banks).India is said to be the home of one third of the world’s poor. About 87 percent of the poorest households do not have access to credit. The demand for microcredit has been estimated at up to $30 billion; the supply is less than $2.2 billion combined by all involved in the sector.
Microfinance has been present in India in one form or another since the 1970s and is now widely accepted as an effective poverty elimination strategy. The microfinance industry has achieved significant growth in part due to the participation of commercial banks, despite this growth, the poverty situation in India continues to be challenging
And hence; the need arise for more players in the sector.
“Microfinance recognizes that poor people are remarkable reservoirs of energy and knowledge. And while the lack of financial services is not just a sign of poverty, today it is looked as an untapped opportunity to create markets, bring people in from the margins and give them the tools to help themselves." – Kofi Annan (Sec. General of UN)