Rume: Rural Microfinance and Employment

The main objective of this paper is to assess the reach and limits of microfinance as a safety net in India after the reforms of the banking sector in the 1990’s. Three sub-objectives will structure the paper: one, theoretical, the second, methodological and the third, practical. Theoretically, through the example of the Self-Help Group Movement in India (a movement which represents the two thirds of microfinance supplied in India), and from a spatial perspective, this paper illustrates the theoretical proposition of H. Weber’s that microfinance: “functions as political safety-net, containing or dampening resistance at the community level to liberalisation policies and economic austerity measures.” (Weber, 2002). Can we speak of this microfinance programme as a safety net for households that lost their bank accounts because of the banking sector liberalisation in India? Did this microfinance programme spread in places affected by banking reforms? Methodologically, author uses spatial analysis to explore financial inclusion inequalities and dynamics in India, including microfinancial services. This kind of spatial economic analysis can enable the exploration of the spatial congruence of data, revealing hidden trends that are not readily apparent in traditional spreadsheet and statistical analysis. Practically, author will produce indices of financial inclusion. These indices will be accompanied by maps which can allow investigators and policy makers to quickly locate pockets of financial exclusion or financial dynamics for further research or the implementation of specific development policies.

To reach these objectives, this paper will first assess effects of the reforms of the banking sector in the 1990’s through a spatial analysis of banking penetration and availability of the banking services at the district level. Then, it will map the distribution and evolution of the microfinance sector in India. Then, it will assess the reach and limits of the spatiality of microfinancial service’s as a safety net in India in view of the reforms of the banking sector in the 1990’s.