Whose Interests Are Microfinance Institutions Serving Today?

The Discussion Map charts important debates from the pages of EPW.


In 1976, Mohammad Yunus set up the Grameen Bank in Bangladesh, which provided small loans to people who could not put up any collateral. According to Yunus, access to credit was a human right, essential for the poor to create self-employment and income.

In their 2014 article, David Hulme and Mathilde Mairot argue that microfinance institutions have strayed away from their original purpose of poverty alleviation and social empowerment to short-term profit-making. Many have begun to replicate the behaviour of mainstream financial institutions, setting financial targets which loan officers are under tremendous pressure to deliver. Microfinance institutions are harassing their clients who are usually too desperate to turn away from the credit being offered. This is true even when credit comes with the catch of high repayment rates. Yet, Western media continues to peddle the “magic of microfinance” in developing countries as a counter to the anomalies of Western neo-liberal financial institutions.

P Satish in his response to Hulme and Mairot says that the authors speak as if microfinance and mainstream finance cannot be differentiated. He believes that it is unfair to generalise and declare that all microfinance institutions replicate the egregious behaviour of big banks. Many continue to provide financial assistance to the underprivileged, but this is not reported. 

Agreeing with P Satish, R Seenivasan also comments that the comparison is unfair because microfinance institutions are much smaller in terms of size of operations. He also discusses the structure and goals of microfinance institutions. 

A few other works that are broadly related to this discussion:
  1. Microfinance: To What End? Findings from Pakistan, Ghazal Zulfiqar, 2014
  2. Regulating Microfinance Institutions, Renuka Sane and Susan Thomas, 2013
  3. Microfinance Industry In India:More Thoughts, M S Sriram, 2011
  4. Microfinance: A Fairy Tale Turns into a Nightmare, M S Sriram, 2010
Ed: To contribute to a more comprehensive discussion map, please share links to other relevant articles in the comments section or write to us at edit@epw.in with the subject line—"Microfinance and Poverty Alleviation."
Curated by Supriya Ravishankar [supriya.ravishankar@gmail.com] and
Kieran Lobo[kieran@epw.in]
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