Whereas it is a vivid reality that the world is increasingly going for the cashless society because of the advancement in the banking sector, the financial institutions have failed to deliver basic features. It is well-known that informal loan is popular among the rural people and small business owners both in the rural and urban areas due to the failure of banks to take their services to the doorsteps of people.
The non-performing loan crisis has plagued the banking sector and, as a result, our banks often suffer from the liquidity crisis. A small number of the so-called businessmen are, literally, in control of the huge amount of cash who are not interested to pay back. They have created the crisis for which the economy of the country is suffering and as a result, most people remain out of the banking network.Most businessmen who deserve bank loan do not get it mostly due to liquidity crisis. Our banks also fall short of efficiency to expand their networks within their reach. The micro credit system showed the way how to reach them. Despite controversies it successfully attracted people from all strata and integrated a huge population in the banking network.
Micro credit system is appreciated worldwide because of its high recovery rate and its access to a wide range of people. It is a common perception that small and mid-level borrowers repay loans in time. Here remains an immense opportunity for our banks to include the huge number of people who are now out of the banking network. This could help them overcome their liquidity crisis to a large extent.
Millions of people who take short term loans from informal lenders at high interest rates will wholeheartedly welcome banking services at low cost and more security of their money. Integration of the large section of people in society with the banking sector will help fulfil the vision for achieving financial inclusion which will bring prosperity for the country.