Microfinance in India

Microfinance refers to the provision of providing financial services to poor or low-income groups. In simple terms, microfinance means providing very poor families with very small loans (micro credit) to help them engage in productive activities or grow their tiny businesses.

More broadly, it refers to a movement that envisions “a world in which poor and near-poor households have permanent access to an appropriate range of high quality financial services, including not just credit but also savings, insurance, and fund transfers.”

Micro Finance Institutions (MFIs) came to prominence in the 1980s, although early experiments date back 30 years in Bangladesh, Brazil and a few other countries. Microcredit has largely been a private (non-profit) sector initiative that avoided becoming overtly political, and as a consequence, has outperformed virtually all other forms of development lending. MFIs insist on repayment, charge interest rates that could cover the costs of credit delivery, and focus on client groups whose alternative source of credit is the informal sector.

The Grameen Bank, one among the most famous microfinance organizations was awarded the Nobel Peace Prize in 2006. Originated from Bangladesh in 1976, it started disbursing small loans to the impoverished without requiring collateral. The founder, Professor Muhammad Yunus, transformed the institution into an independent bank by government legislation in1983.

India has seen an impressive growth in Microfinance Industry in the recent past. Microfinance is one of the few market-based, scaleable anti-poverty solutions that are in place in India today, and the argument to scale it up to meet the overwhelming need is compelling.

Some of the leading Microfinance Institutions in India are:

1) SKS Microfinance

Launched in 1998, SKS Microfinance is one of the fastest growing microfinance organizations in the world. SKS CEO and Founder, Vikram Akula, was recently recognized by Time Magazine as one of today’s 100 most influential people.

2) SHARE Microfin Limited (SML)

SML started operations in 1989 as a not-for-profit society. It was the first MFI in India to obtain a NBFC (non-deposit accepting) license and also the first Indian MFI to carry out a microfinance securitization transaction.

3) Spandana

Spandana was formed in 1997 by Padmaja Reddy and a few close peers who believed that there could exist simple, yet democratic and powerful systems that would enable the poor to harness their naturally entrepreneurial spirit. It is a regulated micro finance institution (MFI) providing financial and support services to rural Indians

If you are looking for a website that covers updated information on Micro Finance industry with various Micro Finance Institutions around the world, MIX MARKET is the right place. MIX MARKET is a global, web-based, microfinance information platform. Incorporated in June 2002 as a not-for-profit private organization, The MIX (Microfinance Information eXchange) aims to promote information exchange in the microfinance industry. The MIX MARKET currently provides data on 1229 MFIs and 101 investors.

You can find a White Paper on Micro finance from the following Link. This paper discusses the successes and failures of various microfinance institutions around the world and lessons learnt from the past in Microfinance Industry.