Profiling of Micro Enterprises in Tamil Nadu and Uttar Pradesh, India

This investigation profiles the micro enterprises that clients of two microfinance institutions (MFIs) in India carry out.The research:

• Examines the key drivers of the enterprise selection process;
• Accumulates data on return on investment, cost structure, growth opportunities and constraints;
• Identifies opportunities for guiding clients towards more efficient use of loans;
• Provides an estimate regarding the actual rate of return on investment (ROI) as compared to the interest rates that MFIs charge;
• Highlights areas of further research that would identify design improvements and new MFI policies that better address the needs of clients.

The paper gives details of the two MFIs that the study chose - ASA Grama Vidiyal and CASHPOR Microcredit (CMC). The main findings of the research are:

• Loan amounts start small and increase consistently as new loan cycles begin;
• Client borrowing does not reach the maximum limit set by the institution;
• Loan sizes are uniform within the group;
• Loans are used for production, trading and consumption; they often support the business of a client's husband or children;
• Enterprise selection process is homogenous and clients do not generally demonstrate much innovation or entrepreneurial spirit;
• Acquiring accurate data on ROI is difficult because the clients' have limited understanding of their financial situation.

The paper concludes by recommending experimentation and flexibility in products, activities and repayment schedules.