Structuring social capital through Micro-Finance: tool for reducing urban poverty

The problem of urbanization and urban poverty is considered as the biggest challenge to development planning in India and eradication of urban poverty has continued to be the target of most of the policies framed in India. It is experienced that most of the poverty alleviation programmes through organized credit channels have not achieved the enquired success. At this juncture to micro-finance can work as a powerful tool to fight urban poverty became the effective approach of financial inclusion. Keeping the above views, the present paper is designed with the following objectives; to examine the dynamics of urbanization and urban poverty in India; to study the role of microfinance in reducing urban poverty; to offer policy suggestion. The paper is based on the secondary information. In India about 25.7 per cent of the total urban population still lives below the poverty line but only 5% of all microcredit in India go to the urban poor. The studies reveal that the urban market poses different demands and challenges compared to the rural sector, which probably contributes to the sectors’ slower growth. The study mainly suggests that there is a need to develop new poverty reduction tools and approaches to attack the multi-dimensional issues of urban poverty. For this, policymakers at the national and local levels should have a good understanding of the nature of urban poverty as well as accurate data on various issues relating to it, in order to develop programme/policies to manage urban poverty in a systematic manner