Case Studies on Select Microfinance Institutions in India

This paper presents case studies of successful microfinance institutions (MFIs) in India, prepared by the MFI, BASIX, for the International Fund for Agricultural Development (IFAD) in order to assess the proposal to finance the 'SIDBI Foundation for Microcredit (SFMC)'.

The study:

• Aims to prepare case studies of twelve successful MFIs in India and analyze the social technology, costs, and risks of four of them.
• Focuses on:
  • Evolution of the MFI and its mission statement;
  • Legal status, ownership and governance;
  • Areas of operation, size and growth over a period;
  • Products, operating costs, budget, sources of funding and human resources.
• Comprised field visits, personal interviews and analysis of management reports that looked the MFIs' cost and revenue structures.

The study found that:

• Most MFIs were under-capitalized, mainly due to their legal forms;
• Although the overall asset quality was good, it could be improved by tightening the loan appraisal process and regular monitoring;
• Most MFIs had dedicated CEOs, who were, in most cases, also the founders;
• Liquidity was not a constraint.

The study recommends that SFMC should:

• Encourage diversity in lending methodologies, legal forms and financing mechanisms;
• Not have restrictions on onlending rates;
• Think of capacity building as a risk mitigating mechanism;
• Get mainstream financial institutions involved in microfinance.