Assessing the Ecosystem of the Villages to Understand the Business Need of Microfinance Firm With Special Reference to South Tamilnadu – Empirical Study

Micro finance has a profitable banking opportunity in India with over 50 million poor clients. The transition of micro finance industry from product to client centered is overdue. This transition is accompanied by two clear trends in the industry (i) diversification of microfinance industry and (ii) development of menu of financial products designed to achieve multiple purposes. The scope of spreading micro finance is clearly evident. There is also missing loan size that needs to be supplied by the micro finance institutions. Commercial banks can't reach millions of poor for whom small loans could make huge difference. There are several reasons for this. Most of the poor are rural, and they are much dispersed. They have low education. The main issue that makes difficult for the banks to serve these less educated customers is that they don't have any asset to use as guarantee. Micro financing starts with the assumption that the poor is willing to pay high interest to have access to finance. The repayment rate is above the commercial repayment rates. The cost of operating micro finance institutions is much higher than their traditional commercial counter parts. With this background, our study attempts to understand the ecosystem and the market condition of a village located in southern India to gauge the need for microfinance