Microfinance and Self-Help Groups in India
Microfinance Institutions and JLGs
NBFC-MFIs lend to joint liability groups, using weekly or monthly repayments and field staff who visit villages.
A second channel is professional microfinance companies.
MFIs
Companies registered with the RBI as NBFC-MFIs lend small sums, often to women.
JLGs
In a joint liability group, members guarantee one another’s loans.
Field work
Loan officers visit villages to collect instalments, which keeps costs high.
Growth
Some MFIs grew into large firms and later became small finance banks.
Collection day
A loan officer meets a group under a tree and collects repayments in cash or via digital transfer.
Assuming MFIs and SHGs are the same
SHGs are self-managed; MFIs are companies.
Key takeaways
- MFIs are regulated companies.
- JLGs rely on mutual guarantees.
- Field visits add cost.
- Some MFIs became banks.
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