Microfinance Crisis In India And Its Enlightenment

Poverty is always the focus across the world, especially in developing countries; it hasbecome the shackles of the economic development. Therefore, developing countries alwaysfind effective tools and methods to get rid of poverty. As an important way to help the poor,microfinance is a summary of the traditional way to support the poor and the result ofinnovation. As a new financial innovation tool, microfinance has always provided a numberof funds for low-income persons, small and medium-sized enterprises and people who have atemporary shortage of funds. It not only brings lots of profits to the operators, but also helpslow-income people to get rid of poverty. Consequently, many countries in the world haveintroduced microfinance and achieved resounding success.India is a typical country who has developed microfinance. However, fast developmentof Indian microfinance market has caused a lot of problems which has led to India’smicrofinance crisis. China and India have numerous similarities, especially in microfinance.But India’s microfinance develops more quickly than China’s, and microfinance crisis havehappened in India. Therefore, its experiences and lessons have great significance for China.This essay firstly makes a comprehensive analysis of background and performance of India’smicrofinance crisis. Subsequently, reasons to India’s microfinance crisis have been discussed.Moreover, it talks about the way to deal with the crisis of India. Finally, the enlightenmentsare reached.This essay puts forward two innovative viewpoints through comprehensive analysis ofmicrofinance crisis in India. On the one hand, it proposes the importance of microfinancesupervision. The central government and the local government should establish doublesupervision mechanism. On the other hand, it points out that the local government, the centralbank and the central government should take corressponding measures to deal with the crisis.