In most developing countries social protection systems are underdeveloped and generally only cover employees with formal employment. Workers in the informal economy are left to their own devices, or rely heavily on the support of their community. Crises are recurrent features in the lives of the poor, often involve high expenditure and drive a poor family deeper into poverty. They are the most vulnerable ones and are the least capable of withstanding the adversaries and regain strength to normalize. Impact of risk is compounded for the poor due to their to their financial exclusion from savings, because banks find it unviable to maintain micro-savings account. In such conditions poor people protect themselves from risks by taking emergency loans. By depleting savings, by selling productive assets, by defaulting on loans and by reducing spending micro finance is the most important socioeconomic development of our times for combating poverty. With the concept of micro credit coming in picture, it had been proved that poor can become creditworthy if they form small groups. In the 90’s, numbers agencies involved in micro credit operations in India started adding other financial securities including micro insurance to its micro credit operations.
Key words: micro finance, micro insurance