Match the following microfinance concepts with their descriptions.

ListI (Concepts)	ListII (Descriptions)
(a)Microcredit	(i)Small,often peer-monitored savings products designed for low-income individuals
(b)Microsavings	(ii)Financial protection against specific perils for low- income populations
(c)Microinsurance	(iii)The use of group responsibility as a guarantee for loan repayment
(d)SocialCollateral	(iv)Small loans provided to entrepreneurs too poor to qualify for traditional bank loans

Correct option is C

The correct answer is (c) a-(iv), b-(i), c-(ii), d-(iii)

Explanation:

• Microcredit refers to small loans given to individuals who typically do not have access to conventional banking services. These loans are meant to help entrepreneurs in low-income communities start or grow small businesses.
• Microsavings are savings products specifically designed for low-income individuals. These are often small amounts that can be saved and are typically monitored by peers or community groups to ensure regular deposits.
• Microinsurance provides financial protection to low-income populations against various risks such as health emergencies, accidents, or natural disasters. It is often affordable and tailored to meet the needs of the poor.
• Social collateral is a system where group responsibility or community ties are used as collateral for loans. In case one member defaults, the group is responsible for ensuring repayment, thereby ensuring accountability.

Information Booster:

Microfinance:

• Definition: Microfinance refers to financial services, including savings accounts, checking accounts, micro-insurance, microcredit, and fund transfers, provided to individuals or groups with limited access to traditional banking facilities.
• It aims to foster financial inclusion, empowering marginalized communities to achieve economic self-reliance and social equity.
• Primary Beneficiaries: Women are often the main recipients of microfinance services, driving their social and financial empowerment.

Microfinance in India:

• Evolution:
• 1974: SEWA Bank, India's first microfinance institution, was founded in Gujarat.
• 1984: NABARD introduced the Self-Help Group (SHG) linkage model to combat poverty.
• 2004: RBI classified microfinance as a priority sector.
• 2010: The Andhra Pradesh crisis highlighted issues in the sector, leading to regulatory reforms.
• 2012: Malegam Committee was established by RBI to address concerns post-crisis.
• 2015: MUDRA Bank was launched to provide credit access for small businesses, enhancing the microfinance ecosystem.

Microfinance Business Models:

Self-Help Groups (SHGs):

• Comprising 10–20 members, SHGs focus on collective savings and use them to secure bank loans under NABARD’s SHG-Bank Linkage Programme.

Microfinance Institutions (MFIs):

• Provide financial services like credit, insurance, and remittances to Joint Liability Groups (JLGs) of 4–10 members engaged in similar economic activities.
• Operate with structured repayment schedules and earn interest, similar to traditional banks.

Types of Microfinance Lenders:

• NGO-MFIs: Registered under the Societies Registration Act, 1860, or the Indian Trusts Act, 1880.
• Co-operative Societies: Examples include Primary Agricultural Credit Societies (PACS) that provide microfinance services.
• Section 8 Companies: Non-profits under the Companies Act, 2013, offering microfinance services.
• NBFC-MFIs: Account for 80% of the market and are regulated by the RBI. They lend to JLGs, relying on bulk loans from banks or their own resources.