Microfinance in India: Growth, Crisis and the Future

Vijay MAHAJAN Fondateur et président, BASIX Social Enterprise Group ; président, Microfinance Institutions Network of India ; président, ExCom de CGAP (Consultative Group to Assist the Poor) ; doyen par intérim, The Livelihood School (Hyderabad, État de l’Andhra Pradesh, Inde).

T. NAVIN Faculté The Livelihood School.

Indian microfinance has undergone extraordinary development in the post-2000 period before becoming a victim of the severe crisis that began in 2010. The reasons for the emergence of microfinance in India are linked to the inability of banks to finance poor households, despite the development of banking networks in rural areas. Thus in 2004, only 5% of the small borrowers were financed through their intermediary. In response to this situation, microfinance made its appearance in the beginning of the 1980s due to the initiatives of self-help groups (SHG) and microfinance institutions (MFI). This article brings out the advantages and defects of these two types of organizations and analyses the 2010 crisis by focusing on the central role played by the political authorities in its development. The transgressions and difficulties of the Indian microfinance model having been brought up to date, the sector should now be able to continue its activities on a healthier basis.