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LIMITS OF MICRO CREDIT FOR RURAL DEVELOPMENT: A CURSORY LOOK

Purusottam Nayak () and Biswambhara Mishra ()

General Economics and Teaching from EconWPA

Abstract: In recent years, most of the countries across the globe are in a sweeping mood to promote micro finance institutions not only as a positive rural development intervention but also as a rural development panacea. Allured by the success of micro credit institutions in developed countries, the developmental economists in under developed and developing economies have increasingly become enthusiastic in the promotion of micro credit as a rural development intervention by tying it neatly with post-liberal development ideology. In the Indian context, the frenzied promotional activity of the micro credit institutions derive in part from the political slogan of ‘Garibi Hatao’ of the Union Government in mid 70’s by the establishment of Grameen Banks which were the offshoot of the putative success of Developmental Financial Institutions in the West. Although the basic philosophy behind the micro credit movement is to eradicate poverty as it stimulates the growth of micro enterprises by developing new markets and by promoting a culture of entrepreneurship, it involves minimal state intervention, thereby shifting the focus of attention away from the society towards individuals. The experience of micro credit schemes in Asia, Africa and South America describes altogether a different story by negating this particular aspect of development intervention. This serves the starting point of the present paper in considering micro credit as the limiting factor of rural development intervention. No doubt, the limits arise from the individualistic focus of the intervention. Keeping consistency with the title of the paper, it not only explores the limitations of micro credit as a rural development intervention through a survey of literatures but also makes an attempt to bring to the focus the concept of rural micro finance in which the issues of credit markets and the poor are explored. The objective of bringing the above discussion to the forefront is to assess the potential impact of micro finance institutions as development interventions. Finally, attempt is made to look at the conditions which limit the effectiveness of micro finance institutions as development interventions in different parts of the globe including India.

Keywords: Micro; Credit; Rural; Development (search for similar items in EconPapers)
JEL-codes: A (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr, nep-ent and nep-mfd
Date: 2005-09-29
Note: Type of Document - doc; pages: 14
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