Microfinance in India - A State of the Sector Report, 2006
2006, Ghate, P.

This report presents the latest developments, issues, recommendations and achievements of the Indian microfinance sector.

This State of the Sector report presents the latest issues, developments, recommendations and achievements of the Indian microfinance sector. The report:

• Synthesizes recent studies that highlight issues on which continued progress depends,
  
• Identifies knowledge gaps that call for further research, statistical efforts, etc.

The report states that:

• Indian microfinance has grown rapidly towards the goal of financial inclusion.
  
• However, it needs to pay attention to the following issues:
  
  • Issues of quality,
    
  • Improving book-keeping in the self-help-group (SHG) model,
    
  • Consumer protection issues in the microfinance institution (MFI) model,
    
  • Extending the depth of outreach and evolving products which are responsive to consumer needs.
  
  
• The sector had underestimated the image problem that confronts the business of money-lending.

The report identifies the following trends:

• Increase in bank credit to MFIs,
  
• Decrease in the constraints for the availability of on-lending funds,
  
• Greater formalization,
  
• Expansion of urban microfinance,
  
• Downscaling,
  
• Diversity in the financial sources for technical assistance for capacity-building,
  
• Increase in microinsurance.

The report recommends:

• Creating an awareness of the need to charge cost-covering interest rates,
  
• Long-term relationship building between MFIs and the government and other stakeholders,
  
• Transparency and attention to consumer protection,
  
• The creation of diversity in the sector,
  
• Improving statistics and information on the sector.

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