Commercialisation of Microfinance in India: A Discussion on the Emperor's Apparel
This paper looks at the growth and commercialization of microfinance in India.
Most early microfinance in India happened through donor and philanthropic funds. These funds were donated to not-for-profit organizations. As activities scaled up, however, these organizations found it imperative to move to a commercial format. Their transformation into commercial entities was spurred by international events, like the transformation of Bancosol in Bolivia and Banco Compartamos in Mexico. The study looks at the transformation of four large Indian MFIs. They include:
- SKS Microfinance;
- Spandana Spoorthy Financials Limited;
- Share Microfin Limited;
- Asmitha Microfin Limited.
In each of these cases, the transformation process had governance implications as well as implications on the personal enrichment of MFI promoters. The paper questions the moral and ethical fabric on which these MFIs are built. Finally, the paper emphasizes that the microfinance sector in India has grown at a rapid pace and that it is necessary to pause and consider before entering the next phase of growth.
