A section of experts, however, still has questions about the potential of microfinance. RPG Foundation president D H Pai Panandiker points out that it has still not entered the Indian economic process in a big way. Unlike Bangladesh, where Nobel Laureate Muhammad Yunus has ushered landmark changes, it is yet to touch the lives of people in rural India.

“The banking sector, through rural banks, has made a greater indent in rural areas,” feels Panandiker. “Thus, it is macro rather than microfinance that has affected the lives of low-income households. In fact, most activities require substantial funds for which even the poor have to approach banks. Therefore, the inroads that can be made by microfinance are limited.”

However, a large number of economists say that India’s socio-economic fabric makes conventional sources of finance inaccessible to the poor, as a result of which the microfinance sector assumes great importance. They point out that financial institutions shy away from giving credit to the poor because of the huge disconnect between their requirements and the economic features of the low-income groups.