The concept of Microfinance dates back to 18th century where theorists started probing into the concept and simplified the results and benefits. Later in 19th century many economists and theorists experimented the concept and started visualizing the in depth benefits to the society. The Marshall Plan after WW II had a great impact in the society. But the concept started to take off only after late 1970's.

Mohammad Yunus of Bangladesh who is considered as the pioneer of micro finance through his research and dedicated work carved out the microfinance and gave it a proper structure. His dedication in the MFI through Grameen Bank has helped millions of people not only in Bangladesh but almost in more number of countries in the world. Mr. Yunus's vision in eradicating poverty and establishment of equality in the society earned him the Nobel Prize in the year 2006.

As indicated by the word, the concept of MFI is to give minimum level of amount to a group of members (ladies varying from 4 – 10) so that they repay in weekly terms by investing in their small business. The group of ladies counter guarantees each other. Every member of the group has to submit proper documents which in turn are verified and after further process loan is granted to them as group or as individual. There is a chance that every member of the group gets loan granted at the same time. And most important every group has a leader who is responsible both ethically and financially.

Mostly these loans are guaranteed to poor entrepreneurs and people who run small business. The reason behind the concept is they lack access to credit for their growth and development. The mechanism behind the financial inclusion to such people is that it is a relation based delivery of financial services and it is a group based model where several small entrepreneurs join together for the benefit of one another.

In simple terms MFI can be defined as " a larger momentum created in the world in which especially the poor and marginalized get access to the higher quality and wide range of financial products and services, including not just credit but also savings, insurance, payments and fund transfers which raises the standard of living as a community".

Microfinance has always been seen as a path to develop the economy, employment and growth through supporting micro-entrepreneurs. Further researches and studies indicate that better understanding of microfinance ecosystem help in formulating sustainable strategies that will help create social benefits and better service delivery to the low income population.