India’s Rural Financial System: Does it Support Pro-Poor Innovation?

Lina Sonne ()
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Lina Sonne: UNU-MERIT

No 2010-039, MERIT Working Papers from United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT)

Abstract: From the perspective of poverty alleviation, socially relevant, or pro-poor, rural innovation is of particular interest in a country like India since it is in rural areas that most of the poor live. Pro-poor innovation in rural areas is more likely to occur through small-scale ventures and entrepreneurs than industrial research and development. The Indian banking system does not efficiently support such rural pro-poor entrepreneur-based innovation. Instead a pioneering alternative financing sector has been emerging recently. There are three broad categories of organisations in this sector: grassroots innovators and incubators, micro venture capital firms, and small-scale financiers beyond microfinance. This paper considers why the core of India’s financial system, its banking sector, does not support rural entrepreneur-based innovation. It ends by discussing the emerging alternative financing sector at the periphery which on the other hand appears able to do so.

Keywords: Pro-poor finance; finance innovation; finance entrepreneurship; financial innovation; rural finance; India; India’s financial system. (search for similar items in EconPapers)
JEL-codes: G21 O16 O31 R51 (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:unm:unumer:2010039

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