The Microfinance Industry in India

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Case Details:

Case Code : FINC042
Case Length : 23 Pages
Period : 1990-2005
Pub. Date : 2005
Teaching Note :Not Available
Organization : Microfinance
Industry : Microfinance
Countries : India

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Types of Microfinance Institutions

Microfinance institutions develop and deliver a range of financial products for the poor. There are three categories of microfinance institutions. They are:


These are Societies under the Societies Registration Act, 1860 or corresponding State Acts.

Others in this category are Public Trusts under the Indian Trust Act 1882, and non-profit companies under Section 25 of the Companies Act, 1956. There are several NGOs which are registered as trust/society and have helped the SHGs form into federations. Federations are formal institutions and carry out both non-financial and financial activities including social and capacity building activities, SHG training, and promotion of new groups, apart from financial intermediation.

These institutions cannot undertake financial intermediation activities on a large scale, as they are prohibited from carrying out any commercial activities...

Microfinance - Major Players

The major players which were instrumental in the growth of microfinance industry in India included NABARD, SIDBI, Rashtriya Mahila Kosh, FWWB and SHARE Microfin Limited.


NABARD was established in 1982 to provide credit to the rural sector. NABARD was a pioneer in microfinance programs in India.

The bank's vision is "to facilitate sustained access to financial services for the unreached poor in rural areas through various microfinance innovations in a cost effective and sustainable manner."

By 2005, NABARD's SHG-Bank Linkage program had emerged as one of the largest microfinance programs in the world. NABARD also collaborated with NGOs, MFIs, banks and governmental agencies in order to use other models of rural credit like the Grameen Model and the individual banking model.

Encouraged by the success of the SHG program, NABARD planned to link 1 million SHGs by 2007 and reach 100 million rural poor...

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