New Delhi: Rural Development Minister Jairam Ramesh has said Micro Finance Institutions (MFIs) alone cannot solve India's poverty problems and added that the combined contribution of Self-Help Groups (SHGs) and MFIs can be a step towards improving the situation for citizens.
"MFIs are not solving India's problems and have come under severe criticism which is due to some of such institutions failing to keep their word and work constructively to benefit the poor," Ramesh told the media here.
"I think a part of the problem has also risen by the hype that has governed many; I would not say many, some of these micro finance institutions . They set out to claim that they are solving India's poverty problems but they are not. I think the vehemence of the backlash was directly proportional to the exaggerated nature of the claims that were being made by many of these institutions," he added.
He also said that it is the SHGs who play a pivotal role in social capital formation.
"I believe that the SHG movement has a wider role to play in social capital formation, in building institutions for the poor, in linking them with banks, in making these institutions in the long run viable institutions of delivering, of public services and micro-finance institutions of course have a very vital role to play in providing as I said a variety of financial products at terms more acceptable than their immediate alternative, that is the money lender," he added.
Micro finance is a medium of providing better financial services to low-income clients or the self-employed, who have access deficit to banking and similar services.