Mainstreaming of Indian Microfinance

A significant feature of microfinance in India is that it has been built upon the existing banking infrastructure. In the process, it has obviated the need for the creation of a new institutional set up or introduction of a separate legal and regulatory framework. In the linkage model, the financial resources are being sourced from regular banking channels as well as members' savings. Thus the problems related to regulation and supervision of microfinance institutions (MFIs), the accessing of public deposits by MFIs and reliance on donor and grant funding are obviated. With the group acting as a collateral substitute, this model also overcomes the intractable problem of collateral provision by the poor. It has to be realised that microfinance is a means or an instrument for development, not an end in itself. To assess the extent to which Indian microfinance has been able to achieve the goal of poverty eradication and fulfil its role as a means for development, requires in-depth impact assessments on an ongoing basis.