Micro Finance...a myth !! What we need is Micro Credit by Banks

I fully agree with your analysis.  In fact it is the responsibility of the banks to provide credit/finance.  We have been watching  the banks  functioning under political pressure/interference.  When banks are no longer banks, some one(may be MFIs) is/are bound  to be created.

So far, no governmental agency had ever bothered to educate the public .

Now, what we see/hear is again a (political) farce.

Economics has taken a back-seat.

Microcredit is the extension of very small loans (micro loans) to those in poverty designed to spur entrepreneurship. These individuals lack collateral, steady employment and a verifiable credit history and therefore cannot meet even the most minimal qualifications to gain access to traditional credit. Microcredit is a part of microfinance, which is the provision of a wider range of financial services to the very poor.

Microcredit is a financial innovation that is generally considered to have originated with the Grameen Bank in Bangladesh. In that country, it has successfully enabled extremely impoverished people to engage in self-employment projects that allow them to generate an income and, in many cases, begin to build wealth and exit poverty. Microcredit is a tool for socioeconomic development.

Microcredit is not only provided in poor countries, but also in one of the world's richest countries, the USA, where about 37 million people (12.6%) live below the poverty line (2010).

Grameen Bank (Muhammad Yunus, a Bangladeshi economist and founder) is an institution that provides microcredit (small loans to poor people possessing no collateral) to help its clients establish creditworthiness and financial self-sufficiency. Yunus and Grameen Bank received the Nobel Prize for Peace in 2006 for their efforts to create economic and social development from below. Lasting peace can not be achieved unless large population groups find ways in which to break out of poverty. Micro-credit is one such means. Development from below also serves to advance democracy and human rights (citation from the Nobel Prize committee).

On the other hand, Microfinance is the provision of financial services to low-income clients or solidarity lending groups including consumers and the self-employed, who traditionally lack access to banking and related services.

Microfinance has been growing rapidly with $25 billion currently at work in microfinance loans. It is estimated that the industry needs around $250 billion to get capital to all the poor people who need it (2010). The industry has been growing rapidly, and concerns have arisen that the rate of capital flowing into microfinance is a potential risk unless managed well.

Thus, a proper mix of micro credit and microfinance will help to alleviate the plight of the poor. However, microfinance is a potential risk that needs to be managed well so that controversies and other issues like the recent MFI spat (SKS Microfinance) and other MFI problems in Andhra Pradesh does not destabilize the MFI industry and it may also lead to the demise of the MFI in the future.

Thanks for the referral, Suryanarayan....