22,Mar,2008

Inverting the Pyramid – 2008

India is a huge market for microfinance – within a fast growing economy, it has more than 400 million poor’ seeking an opportunity to reduce their vulnerabilities, create assets and ensure income security. For many, microfinance forms the first stepping stone of this opportunity.

Microfinance Institutions (MFIs) in India have emerged as effective financial intermediaries offering a middle path – an alternative to the inaccessible formal financial institutions and the exploitative money lenders. With early stage donor funding and growth capital from banks, they have demonstrated commendable scale, sustainability and impacts.

However, to reach out to the majority of un-banked millions, this industry needs much higher sums of capital to help it scale up rapidly and widen its range of services On the other hand, there is substantial capital present across the globe in search of opportunities that really make a difference to the world’s poor. While microfinance is one such opportunity popular among capital providers, it is critical to channel this capital effectively to sustainable interventions working closely with the poor. The available capital takes the shape of a pyramid with a few risk taking capital providers at the peak and many more at the base The available opportunities also take the shape of a pyramid with a few large MFIs at the peak and many smaller ones at the base. While capital has started to flow from a few risk taking capital providers in the first pyramid into some of the large MFIs in the latter, a clear challenge is to open the aperture wider and create more partnerships between capital providers and MFIs.

The Inverting the Pyramid series by Intellecap was launched in 2007 as an attempt to capture this process on an annual basis and track the efforts made, successes gained and challenges that remain. Every year, it maps the microfinance landscape in India, identifies the key highlights of the year, explores strides made in addressing the huge demand-supply gap that exists in the market and analyzes the financial performance of MFIs, one of the key providers of microfinance in India. Further, it identifies the key drivers for future growth and sustainability of this industry growth, capital needs, risks and priorities in the short to medium term.

To analyze the industry performance, Inverting the Pyramid uses data from a sample of 70 MFIs in India. It draws insights from over 30 stakeholders in the industry to understand the dominant trends, future outlook, concerns and priorities.

To analyze the industry performance, Inverting the Pyramid uses data from a sample of 70 MFIs in India. It draws insights from over 30 stakeholders in the industry to understand the dominant trends, future outlook, concerns and priorities.

The 2007 edition entitled The Changing Face of Indian Microfinance captured Indian microfinance as a dynamic industry on the move, changing its ambitions and scale of operations rapidly. This year, Indian Microfinance Scaling Against the Odds presents a resilient industry maintaining its scale and asset quality amidst a turbulent financing landscape.

Questions or comments on this publication may be addressed to publications@intellecap.net.

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