Pro-Poor Microfinance to Pro-Poor Micro Health Insurance: Perspectives and Challenges of Microfinance Institutions in India

Abstract

Present booming of microfinance has started with slow pace three decades ago. It is one of the many mechanisms for poverty eradication and providing livelihoods for the vulnerable sections of the society. Microfinance is seen as provision of financial service to mostly low-income people, especially the poor and very poor who are without any tangible assets. For the first time, a substantial proportion of the low-income families of major developing country were served by the activity. The start of the twenty first century reinforced this trend as the Bangladesh numbers continued to grow impressively. In India, a substantial microfinance system based on Self-help groups (SHGs) developed. The self-help group movement has become the basic for programmes promoting empowerment and overall improvement of the status of women in society. The incredible result (about 98 percent repayment rate) of microfinance movement has permanently changed the face of the financial sector through innovation and challenges to conventional thinking, the limits of the microfinance model become evident when it comes to serving many more poor people who are still excluded and to capturing a larger share of the financial service business of the existing clientele (Yojana, January 2008).

The delivery of health insurance services to low-income communities is an exciting opportunity to improve the quality of life of the working poor. Since microfinance institutions are potential delivery agents for insurance, it is important to recognise their diversity, strengths, and weaknesses. There is a healthy need for microinsurance in India’s poverty eradication strategy. According to A. Rajivan (Yajana, January 2008) with insurance the vulnerable can prepare for an adverse event before it occurs, instead of being paralysed by shocks afterwards. Microfinance also increases the likelihood that the poor eat well, have health access and send their children to school.

Keywords: Poor, Pro-poor, Microfinance, Micro Health Insurance, SHGs, NGOs