The Changing Face of Microfinance in India: The Costs and Benefits of Transforming from an NGO to a Non-Bank Financial Company
Smith, Raven R.
2006
- Submitted in partial fulfillment of the degree Master of Arts in Law and Diplomacy at the Fletcher School of Law and Diplomacy. Abstract: It has been approximately 25 years since the birth of Microfinance with the Founding of the Grameen Bank in Bangladesh by Professor Mohammad Yunus. The field has since spread with the adaptation and evolution of Professor Yunus' ideas to various countries and ... read morecontexts. However, with all the excitement about the prospects of the field to contribute to poverty alleviation and the integration of the world's poor into the rapidly evolving global market system, the Consultative Group to Assist the Poorest (CGAP) estimates that microfinance probably reaches fewer than 5 percent of its potential clients. Although this is a very rough estimate of those not reached by formal financial institutions, it might serve to provide a general idea of what share of the potential clients of microfinance have yet to be reached. India is home to a growing and innovative sector of microfinance. With a large portion of the world's poor, India is likely to have a large potential demand for microfinance. For this reason, It makes sense to consider the changing face of microfinance in India, in order to shed light on comparable changes in the field all over the world. The overarching question this study looks to answer in the interests of greater impact and outreach of microfinance in India is: What are the costs and benefits of a Microfinance NGO of transforming to a Non-Bank Financial Company (NBFC)? More specifically, how does organizational form affect a Microfinance Institution's ability to achieve success by both financial and social standards? By taking a closer look at three cases of transformation to or start up as an NBFC, we can better understand the intricacies, challenges, successes, and opportunities for microfinance delivery of independent MFIs in India.read less
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