MFI and rural indebtedness: A case study of Bihar and Jharkhand

Manesh Choubey

The objective of the paper is to analyse the indebtedness through microfinance institutions in Bihar and Jharkhand. The data were collected from microfinance institutions operating in Bihar and Jharkhand. Over-indebtedness had become a problem in India because of the increased number of microcredit institutions, a lack of regulation and the absence of a strong credit bureau that would make it easier to identify clients who have multiple loans. Average loan amount from microfinance institutions was lower in Bihar as compared Jharkhand. About one fourth (26%) clients have taken loan from small microfinance institutions whereas three fourth (74%) clients have taken loan from big microfinance institutions. majority of the borrowers of microfinance institutions were from backward castes (41%) followed by SC (27%). Schedule tribes and minority constituted 5 % and 7% respectively. Less than one third (27%) of the total borrowers of MFIs were from General Category. Despite the presence of financial institutions like Commercial Banks, Regional Rural Banks, the rural mass turned toward Micro finance institutions for credit. Although microfinance institutions were less preferred if formal institutions deliver adequate credit on time and hassle free. Hassle free; door step service, timely availability and transparency were the reasons behind people opting for microfinance institutions

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