Analyzing the Impact of Legal Form of Indian Microfinance Institutions on Financial Sustainability and Outreach
Author | : Sumil Patel |
Publisher | : |
Total Pages | : |
Release | : 2017 |
ISBN-10 | : OCLC:992848872 |
ISBN-13 | : |
Rating | : 4/5 (72 Downloads) |
Download or read book Analyzing the Impact of Legal Form of Indian Microfinance Institutions on Financial Sustainability and Outreach written by Sumil Patel and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: India boasts the largest microfinance market in the world, serving almost 40 million clients through about 220 registered institutions. Microfinance quickly became a popular industry for both business practitioners and researchers due to its ability to reduce poverty. While the industry has been doing well in serving the poor, it is still not reaching everyone that it could. There is room for improvement, and analyzing the legal forms of the industry would help. The current legal landscape of India allows microfinance institutions to take one of five legal forms: (1) Society, (2) Trust, (3) Section 25, (4) Cooperative, and (5) Non-Banking Financial Company. Each form differs in the amount of regulation it must go through, how it can raise capital, rules for formation, taxation, and services it is allowed to perform. This thesis suggests that the form of microfinance institution plays a large role in determining its effectiveness. It considers the laws that govern the microfinance institutions and analyzes the effects of these laws on two important metrics for effectiveness: profitability and client outreach. The thesis explores each legal form by analyzing a company of each type both qualitatively and quantitatively; after that legal forms are analyzed at the industry level. It finds that, at the industry level, Non-Banking Financial Companies are the most financially sustainable legal form and the most successful at client outreach. Therefore, Non-Banking Financial Companies should be promoted in India to make sure microfinance is reaching as many people as it can. Other developing countries around the world can employ some of the effective features of Non-Banking Financial Companies to ultimately reduce poverty in their nations as well.