Do outreach approaches differ between Self-Help Group-Bank Linkage and Microfinance Institution-based microfinance? Evidences from Indian states

Sunil Sangwan () and Narayan Chandra Nayak ()
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Sunil Sangwan: Indian Institute of Technology Kharagpur
Narayan Chandra Nayak: Indian Institute of Technology Kharagpur

Journal of Social and Economic Development, 2019, vol. 21, issue 1, No 4, 93-115

Abstract: Abstract In India, currently, two prominent modes of microfinance operations are in vogue—Self-Help Group-Bank linkage programme and private Microfinance Institutions. However, their penetration across states is not uniform. As there are two approaches to microfinance outreach, namely ‘financial systems approach’ and ‘poverty lending approach’ (Robinson in The microfinance revolution: sustainable finance for the poor, World Bank, Washington, 2001), in Indian context, this study examines whether the approach to outreach is common to both the models or there exists divergence. The study observes the persistence of interregional divergence in microfinance penetration with larger concentration of loan portfolios and client base in the southern regions of the country. There is empirical support to the possibility of mission drift as microfinance providers tend to prefer relatively developed states. Despite some indications of poverty lending, the financial sustainability appears to be the key factor behind the skewed regional distribution of both the microfinance providers, hence warranting a robust regulatory system to overcome the problem.

Keywords: Financial sustainability; India; Microfinance; Mission drift; Poverty lending (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s40847-019-00078-w

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