Solution

In 2000-01 budget, the government created the Micro Finance Development Fund (MFDF) with an initial contribution of Rs.100 crore (funded by Reserve Bank of India – Rs.40 crore; NABARD – Rs.40 crore and the balance Rs.20 crore by commercial banks) to scale up the microfinance sector. In the Union Budget for 2005-06, the Government of India re-designated the existing MFDF as Micro Finance Development and Equity Fund (MFDEF) and raised its corpus from Rs.100 crore to Rs. 200 crores with the similar ratio of contribution from the above banks. The MFDEF is managed and administered by NABARD. The objective of MFDEF is to facilitate and support the orderly growth of the microfinance sector through diverse modalities for enlarging the flow of financial services to the poor, with consistent sustainability particularly for women and vulnerable sections of society