Question

“Micro-credit programmes have helped to fill in the gaps in the formal credit system.” 
Justify the given statement.

Hint:

Micro-credit enhances financial inclusion by offering small, collateral-free loans to the underserved, fostering self-employment, women empowerment, and poverty alleviation.

Answer 1

Micro-credit programmes play a crucial role in bridging the gap between the formal credit system and underserved populations by providing small, collateral-free loans to individuals who lack access to traditional banking services. 
How Micro-Credit Programmes Fill Gaps in the Formal Credit System: Access to Credit for the Underserved: Traditional banking institutions often exclude low-income groups, rural populations, and small entrepreneurs due to lack of collateral and credit history. Micro-credit programmes, operated through Self-Help Groups (SHGs) and Microfinance Institutions (MFIs), provide financial assistance to these segments, enabling them to start or expand their businesses. 
Financial Inclusion and Women Empowerment: Many micro-credit programmes focus on lending to women, fostering financial independence and improving household welfare. Women-led SHGs help in promoting entrepreneurship, enhancing social status, and contributing to household income.