In the region of rural Uttar Pradesh, illiteracy rate is high and economic opportunity is almost non-existent. People found the region difficult to have a sustainable business. Microfinance is known to be an effective solution to help people in such economic environment. By providing small credit without collateral requirement, microfinance can provide the initial fund needed for villager venture and eventually break the vicious cycle of poverty. Various forms of microfinance are available and other financial institutions are interested to enter the microfinance market. However one of the biggest problems of the faced by both the lender and the borrower is the lack of information flow. The banks have difficulties getting the information of the lender and the lenders have difficulties getting information about the bank. The lack of information is a barrier to many institutions to enter the microfinance business.
Another problem in the microfinance industry in India is that there is an imbalance of power between the financial institutes and the people. The difficulties for financial institutes to get the information they need are relative smaller than the difficulties for the people to get the information they want. This imbalance of power puts the villagers at a disadvantage. Since microfinance has high interest rate and different institutes may have very different rates, the villager will not be able to get their most desirable rate if they don’t have a way to get information. Villagers simply cannot compare rate from different institutes.