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Making Money Work for the Poor in India: Inclusive Finance through Bank-Moneylender Linkages

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Type: Working Paper
Author: Garg, A.K.; Pandey, Neha
Date: 2007
URI: https://hdl.handle.net/10535/4135
Sector: Social Organization
General & Multiple Resources
Region: Middle East & South Asia
Subject(s): economic development
poverty alleviation
business and finance
indigenous institutions
informal economy
Abstract: "India has one of the most extensive financial systems comprising of commercial and cooperative banks, microfinance institutions and self-help groups. Yet, the vast majority of rural poor still does not have access to formal financial services necessary for poverty reduction and wealth creation. What effective measures are required to make money work for the poor? Here we draw on published research to show that neither banks nor microfinance institutions have been able to replace moneylenders in India. Indeed, the informal moneylenders have dynamically outmanoeuvred formal financial system in their reach to poor by their adaptive management skills and resilient social networks. We suggest that in order to reduce poverty and propel India towards sustainable human well-being a comprehensive financial system based on the bank-moneylender linkages is required. Without a full integration of traditional and contemporary financial innovations any attempt to expand the formal financial system in India is likely to be of limited utility to the poor."

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