Microfinance: Analytical Issues for India

Poor households face many constraints in trying to save, invest, and protect their livelihoods. They take financial intermediation seriously and devote considerable effort to finding workable solutions. Most of the solutions are found in the informal sector, which, so far, offers low-income households convenience and flexibility unmatched by formal intermediaries. The microfinance movement is striving to match the convenience and flexibility of the informal sector, while adding reliability and the promise of continuity, and in some countries it is already doing this on a significant scale. Getting to this point - reaching poor people on a massive scale with popular products on a continuous basis - has involved rethinking basic assumptions along the way. One by one, the keywords of the 1980s and 1990s - women, groups, graduation, microbusinesses, and credit - are giving way to those of the new century - convenience, reliability, continuity, and a flexible range of services. We describe the elements that we feel have contributed most and that are most relevant for India.