Topic: Indian Economy and issues relating to planning, mobilization of resources
Q5. “Innovation is key to making microfinance both affordable and sustainable”. Discuss the challenges faced by MFIs and how they can leverage financial innovations to improve their services. (10 M)
Difficulty Level: Medium
Reference: TH
Why the question
A top Reserve Bank of India (RBI) official delivered a sharp message to microfinance institutions (MFIs), urging them to realign their lending practices and prioritise affordable credit offerings.Key Demand of the question
Challenges faced by MFIs. Role of financial innovations in improving MFI services.
Structure of the Answer:
Introduction
Briefly define microfinance and its significance in financial inclusion.
Body
- Mention key challenges faced by MFIs (like operational costs, outreach, and risk management).
- Discuss how financial innovations (like digital platforms, fintech partnerships, and AI-driven credit assessment) can address these challenges.
Conclusion
Write about the potential of innovation in making microfinance more affordable and sustainable, linking it to broader financial inclusion goals.Top of Form
