Interest-free Microfinance as a New Hope to Micro-entrepreneurs: A Case of India with Special Reference to Jammu and Kashmir

The existing interest-based microfinance has not been able to fulfill the inclusive demand of the financially inaccessible section of the society. The reasons being mostly the high rates of interest exceeding the rate of return on micro-credit, commercialization of microfinance institutions, combining multiple products like savings insurance and loan, unregulated hyper competitive market, abusive loan recovery practices, multiple lending, high transaction costs, issues of financial sustainability, commercialization, profit enlargement motive etc. To overcome such constraints, the current study finds Interest-free microfinance as the new opportunity in India to unleash some novel homegrown ideas for the use of entrepreneurship as an antidote to poverty. The first part of the study presents the survey results that expose the potential for Interest-free microfinance in the state of Jammu and Kashmir (India) typically because of its interest-free nature and the prevailing constraints of its conventional counterpart. In its second part, the study proposes a value-based model of Interest-free microfinance for the enhanced development of the micro-entrepreneurial class.