Microfinance Institutions, Responsibility, and Strategic Direction

• DOI: http://doi.org/10.1002/jsc.2083
• Published date: 01 September 2016
• Date: 01 September 2016
• Author: Dimple Tresa Abraham,Shrikant S. Kalamkar

RESEARCH ARTICLE

Strat. Change 25: 603–612 (2016)

Published online in Wiley Online Library

(wileyonlinelibrary.com) DOI: 10.1002/jsc.2083

Copyright © 2016 John Wiley & Sons, Ltd.

Strategic Change: Briengs in Entrepreneurial Finance

Strategic Change

DOI: 10.1002/jsc.2083

Micronance Institutions, Responsibility,

and Strategic Direction1

Dimple Tresa Abraham

Centre for Women’s Development Studies, New Delhi, India

Shrikant S. Kalamkar

Agro‐Economic Research Centre, Gujarat, India

MFIs and the micronance sector should align with state goals of job creation

and poverty eradication to rediscover their original mission.

e micronance sector has passed a crest, an extended trough, and is riding a

wave of resurgence in India. e cause of its debacle and subsequent government

action is now rmly in the past, and the sector is on an upward trajectory (CRISIL,

2014; Sa‐Dhan, 2014). e annual loans disbursed at the end of FY 2015–16

amounted to 10.31 billion USD (conversion rate of 1 USD = 60 Rs applied

throughout), recording a rise of 65 percent over the previous nancial year (MFIN,

2016) and exceeding all growth projections. e condence of the government in

the sector was rearmed when the Reserve Bank of India (RBI) granted a banking

license to Bandhan Financial Services, the largest micro lender in the country. e

competitive scenario continues to be diverse and intense, as the industry operates

under a more regulated environment (Ashta, 2012), which has also put in place

important mechanisms for self‐regulation, as it continues to deal with sensitive

and vulnerable segments of customers (Ingham et al., 2013).

Firms doing business with vulnerable clients, particularly the poor, should be

doubly careful in how they conduct themselves and carefully build an image of a

concerned and socially responsible entity. In fact, it was the careless conduct of

some leading micronance institutions (MFIs) in one of the South Indian states

that led to the downfall of the sector toward the latter part of the previous decade.

e industry today is certainly poised for further growth, with the government

emphasizing an inclusive growth agenda. e sector may see various innovations,

new product developments, and even new ways of partnering clients to achieve

the nancial inclusion agenda.

is article is organized as follows. First, it briey touches upon developments

in the micronance sector, particularly the crisis in the state of Andhra Pradesh.

1 JEL classication codes: G21, G38, O13, O31, P13.

MFIs should innovate in approach

and introduce products toward

furthering enterprise development

and self‐employment activities

among their clients.

Social mission should guide

economic aspirations of MFIs.

Future operations should exhibit

even higher levels of responsibility

toward clients for bigger societal

impacts.