Building Sustainable & Profitable Micro-Finance Institution in India in Changing Regulatory Environment

Abstract

Microfinance has been accepted as a tool for poverty alleviation and financial inclusion in most of the countries. Understanding the need to bridge the gap in accessing credit facilities for the excluded sections of people. From the community oriented pawn shops founded by Franciscan monks to Muhammad Yunus and Al Whittaker in 1970 the financial services to poor has evolved. Microfinance Institutions have provided a viable option for poor especially in rural areas where people find it difficult to avail financial services like micro credit, savings account etc. in absence of various documents and collateral.Sustainability itself has to be seen in a broader sense than just financial sustainability. The sustainability of demand, of the MFI’s mission, of its ownership and governance structure and the legal and regulatory framework under which it works, are all contributory to overall here, the sustainability of an MFI by itself may not be enough unless a full-fledged micro-finance sector (MFS) is established on sustainable lines. In this paper authors have made an attempt to examine what comes in the way of making Indian MFIs sustainable and how can a good regulatory framework may facilitate this.