Understanding the ecosystem of microfinance institutions in India

What is it about?

Microfinance institutions (MFIs) promise to deliver poverty alleviation while being sustainable. However, in recent years, the idea of microfinance has been questioned. The study of MFIs or their business environment from a Strategic Management perspective has not been taken up. This is despite the fact that MFIs promise financial inclusion of the bottom-of-the-pyramid segment and, which will in turn, lead to sustainable development. Moreover, MFIs have to regularly negotiate various tradeoffs the study of which could be interesting from a strategic perspective. For instance, empirical evidence suggests that MFIs face a trade-off between profitability (financial sustainability) and outreach (reaching the poorest customers). A study of the ecosystem of MFIs from the strategic perspective would also be of interest to other stakeholders such as donors, investors, banks, government, etc. For MFIs, knowing their place in the ecosystem is an important step in determining their strategy. This study attempts to understand the ecosystem of MFIs in India. The discussions in this essay entail a literature review that analyses the discourse on the ecosystem of MFIs, and based on this an attempt has been made to conceptually develop a model for the ecosystem of MFIs in India.

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