Microfinance has been an important tool in poverty alleviation, empowerment of women and in bringing about financial inclusion. India has the highest number of households, about 145 million, which are excluded from banking system. Also, out of 6 lakh villages in India, only approximately 50000 have access to finance. Hence there exists a great opportunity for the microfinance sector to provide credit to the low-income population, thereby, reducing poverty and thus in the development of country as a whole. Technological innovations, product requirements, and on-going efforts to strengthen the capacity of Indian MFIs are needed to reduce costs, increase outreach and boost overall profitability. Although the microfinance sector has reported an impressive growth, sufficient regulatory and governance would help achieve the goal of poverty alleviation and financial inclusion and this could be achieved with combined cooperation of banks, donors, Government, NGO and other players in the country. Thus, continuous efforts are required to diversify the sources of funding available for the MFIs in order to attract foreign Investment for well-established MFIs in order to serve the rural low-income population, alleviate poverty and also, make them profitable.

Microfinance has the fool proof potential to be a transformative tool for socio-economic development in the country. However, to actualise the maximum limit of its potential, it is essential to address the challenges and obstacles faced by microfinance providers and borrowers. By implementing policy interventions, microfinance can become a more effective and inclusive mechanism for poverty alleviation and financial inclusion at the national level as well as the state level.