A Study on the Importance of Microfinance Banks in the Economic Development of Idukki District

ABSTRACT Microfinance services are designed to reach excluded customers, usually poorer population segments, possibly socially marginalized, or geographically more isolated, and to help them become self-sufficient. The improvement of rural livelihoods is the aspect of poverty reduction that Microfinance Institutions concentrate on.Micro financial schemes play vital role in increasing women’s participation in economic activities and decision making. With increasing demand for rural finance, and the shortages of formal sources, the MFIs have tremendous challenges and opportunities in the economic development of India. Lack of security and high operating costs are some of the major limitations faced by the banks while providing loans to poor people. This study aims to study the financial assistance provided by microfinance bank and the benefits enjoyed by customers in Idukki district.and to understand the problems faced by microfinance banks while providing financial assistance to clients in various sectors of the societyalong with the role of microfinance banks in the welfare of Self-Help Groups (SHGs) and the development of economy with a random sample of 50 microfinance bank customers. The data were analyzed and interpreted using various descriptive and inferential statistical tools like percentages, graphs, tables, Independent sample T – test, and ANOVA. It is found that majority of respondents were able to repay half the credit amount and it is more convenient to get credit from microfinance banks , while most of the respondents agreed that loans are provided at high interest rates and the respondents got an improved performance of their SHG as a result of financial assistance from microfinance banks along with their decision-making power and overall socio-economic status. Above all, this study found that microfinance institutions significantly expand access to financial services for low-income individuals, households, and small businesses that are typically excluded from conventional banking systems due to lack of collateral, low income, or limited credit history and thus played a vital role in the economic development of Idukki district.