JANHIT believes that grant/subsidy or credit by itself will never lift marginalized section of society out of poverty. Financial services must be part of broad based programmes that address a range of livelihood related needs to directly deal with poverty. This not only requires financial assistance but also handholding for technical support. But formal financial institutions do not offer both integrated services. Moreover most of them have not been able to reach the poor households, particularly women, in the unorganized sector.

Structural rigidities and overheads lead to high cost of making small loans. Organizational philosophy has not been oriented towards recognizing the poor as credit worthy. The problem has been compounded by low level of influence of the poor, either about their credit worthiness or their demand for savings services. Micro-finance programmes have often been implemented by large banks at government behest. Low levels of recovery have been further eroded due to loan waiver programme leading to institutional disenchantment with lending to small borrowers.

All this gave rise to the concept of micro-credit for the poorest segment along with a new set of credit delivery techniques. With the support of voluntary organizations, an informal sector comprising small Self Help Groups (SHGs) started mobilizing savings of their members and lending these resources among the members on a micro scale. The potential of these SHGs to develop as local financial intermediaries to reach the poor has gained recognition due to their community based participatory approach and sustainability. Loan recovery rates in SHGs have been significantly higher than commercial banks in spite of loans going to poor, unorganized individuals without security or collateral.