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Micro Finance Institutions (MFIs) are specialized financial organizations that provide a wide range of financial services to low-income individuals, economically weaker sections, self-employed persons, micro-entrepreneurs, small farmers, artisans, and marginalized communities who generally lack access to formal banking services. These institutions offer small loans, savings facilities, insurance products, remittance services, and financial advisory services to people who do not possess sufficient collateral or formal credit history required by commercial banks. The primary objective of MFIs is to reduce poverty, promote entrepreneurship, improve livelihoods, and ensure that financial services reach every section of society. Microfinance emerged as an alternative financial system to bridge the gap between formal banking institutions and the financially excluded population. Traditional banking institutions often hesitate to lend to poor households due to high transaction costs, lack of collateral, and perceived credit risks. Microfinance institutions overcome these barriers by adopting innovative lending methodologies such as group lending, joint liability groups, self-help groups (SHGs), doorstep banking, flexible repayment schedules, and relationship-based lending. In India, the microfinance sector consists of various institutional forms including Non-Banking Financial Company-Micro Finance Institutions (NBFC-MFIs), Self-Help Group-Bank Linkage Programme (SHG-BLP), cooperative societies, trusts, societies, regional rural banks, small finance banks, and non-governmental organizations (NGOs). The Reserve Bank of India regulates NBFC-MFIs and has issued guidelines relating to borrower protection, pricing, transparency, governance, and responsible lending practices. Financial inclusion refers to the process of ensuring affordable, timely, and adequate access to financial products and services for all sections of society, especially vulnerable and disadvantaged groups. It includes access to savings accounts, credit, insurance, pension, remittance facilities, and digital payment systems. Microfinance plays a significant role in achieving financial inclusion by integrating financially excluded individuals into the formal financial system. One of the most important roles of microfinance is providing access to credit for the poor. Low-income households often depend on informal moneylenders who charge exorbitant rates of interest. MFIs offer small loans at relatively reasonable interest rates, enabling borrowers to meet productive as well as emergency financial needs. These loans help individuals establish micro-enterprises, purchase agricultural inputs, invest in livestock, acquire equipment, or meet educational and _______ _____ _____ _______ __________ _________ _______ __________ _______ _________.
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