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Time to get back to basics?

Document type: article
Download file(s): 188463 (869 KB)
Abstract: The nature of MFIs has changed over the years, evolving from an NGO towards a business-centred approach. It has now reached the status of an ’industry’ and it has become part of the financial service system. This is mainly due to the participation of for-profit trusts in the contribution of the MFIs. For-profit trusts disappeared or reduced in size over the years, leaving their members in the position of sharing the growth and returns amongst themselves, and thus introducing a business-oriented approach. This way of dealing with the issue worsens an already unclear situation, leading towards a lack of transparency and ethical concerns. With the emergence of a for-profit orientation, the MFIs were able to lower costs and increase the margins. In India, this brought private equity (PE) actors into play. Then, the consequent growth and gain within the institutions thanks to PE made clear that profit became the goal in itself, and the clients’ needs were put aside. Moreover, MFIs, hoping to make the most of the profit, have being widely spread across specific areas of the country, even in very small geographical zones. Overall, there is a high need for MFIs in India, especially because its government programmes will never be able to address the population as a whole. However, those institutions need to bring the role and needs of the client to the forefront otherwise they will not face a bright future. By adopting a more client-centred approach, both the poor and the overall sector of microfinance institutions could benefit from greater results.
Authors: Sharma, M.K. , Wright, G.A.N.
Country: India
Category: General
End Page: 40
Serial number: 2
ISSN: [2210-2175]
Volume: I
Journal: Spanda Journal : quarterly of the Spanda Foundation
Keywords: credit , ethics , finance , poverty
Language: eng
Organization: Spanda Foundation
Year: 2010
Region: South Asia
Right: © 2010 Spanda Foundation
Subject: Economic Development and Trade
Start Page: 38
Title: Time to get back to basics?