ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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MFIs vs SHGs

With reference to the article by Tara S Nair, “Microfinance: Lessons from a Crisis” (EPW, 5 February 2011), I would like to add the following:

Poverty reduction through the self-help group (SHG)-bank linkage programme is the only viable option, as successfully demonstrated in rural Andhra Pradesh. The equity-funded microfi nance institutions (MFIs) cannot serve as pro-poor institutional alternatives. Hence, there is a need to regulate the expansionist MFIs which are serving the interests of the investors by ignoring the very objective of addressing the microcredit needs of the poor. Microcredit through the SHG mode has, in fact, demonstrated in unequivocal terms that poverty reduction is quite possible through small lending without any collateral and also lead to a good beginning for women’s empowerment. However, microcredit is a necessary condition but obviously not a sufficient one for empowerment.

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