8. MFIs and NBFCs Contributions Towards Financial Inclusion and Circular Economy

The chapter discusses the significant role of Microfinance Institutions (MFIs) and Non-Banking Financial Companies (NBFCs) in advancing financial inclusion and promoting a circular economy. It highlights the government's impetus in forming savings and credit groups, which have proven effective in building the capacity of the poor. The text explores how MFIs and NBFCs have traditionally supported linear economies but can transition to circular economies, emphasizing the importance of these institutions in achieving this shift. The chapter also emphasizes the crucial role of women entrepreneurs in this process, noting that ignoring them would neglect 50% of entrepreneurial talent. The text delves into various theories and models of financial inclusion, such as the 'helper-therapy principle' and the 'vulnerable group theory,' and discusses the challenges and policy implications of microfinance programs. Additionally, it provides insights into successful initiatives like the Self-Help Group (SHG) movement in India and the Grameen Bank in Bangladesh, which have significantly impacted poverty alleviation and women's empowerment. The chapter concludes by stressing the need for regulation and innovation in the microfinance sector to ensure its continued effectiveness in promoting financial inclusion and the circular economy.