The Tipping Point in Micro -Finance Industry

Abstract

The transformation of micro-credit into micro-finance has changed the direction of industry. There is a paradigm shift in objective of micro-finance community from reducing inequality and inducing social change to self-sustainability and profitability. This shift divided scholars into two distinct schools of thought – the ‘welfarists’ and the ‘institutionalists’. The commercialization of industry has exposed the risks of this approach. The Indian microfinance industry, being characterized by commercialization, multiple borrowing and discrepancy in lending practices has witnessed crisis. This paper examines a complete turnaround reflected in portfolio quality of micro-finance institutions at a global level and at the same time explores the factors responsible for crisis in Indian microfinance industry.