Searching for the Middle Path in Microfinance Delivery

Introduction

The ideological split in microfinance into two broad schools of thought— institutionist and welfarist (Woller, Dunford & Woodswarth, 1999)—has influenced the operations of microfinance organisations. The split, also termed as the ‘microfinance schism’ (Morduch, 2000), covers two different philosophical approaches, delivery models and organisational arrangements, all masked under a common commitment to poverty eradication. Although both the approaches agree on the final goal of poverty eradication, they differ on the means to achieve the goal. The institutionist approach focuses on financial sustainability of the microfinance organisation while the welfarist approach emphasises providing credit with a subsidised rate of interest. The advocates of the institutionist approach would vouch for the commercial microfinance approach considering that it is self-sustaining and also easily scalable. The welfarist would generally condemn the commercial approach accusing it of mission drift and would advocate a slow-growth model of microfinance focussing on the depth of outreach goal (Weiss & Montogomery, 2005). The welfarist approach to microfinance is termed as ‘inefficient’ by the Ohio School of researchers while the institutionist approach is accused of leaving the poorest of the poor out from their area of operation (Copestake, 2007; Hulme & Mosley, 1996).

The debate is still open and no conclusive evidence is available favouring the effectiveness of any of these two schools of microfinance, till now (Roodman, 2012). There is also a general consensus that these schools of thought are not necessarily rivals rather, they can function in a compatible manner (Rhyne, 1998) and there, in fact, exists a trade-off between the welfarist and institutionist approaches (von Pischke, 1996). However, in practice, the trade-off seems to be difficult to achieve and microfinance organisations generally appear to be skewed towards either one of the two schools of thoughts. Either microfinance organisations become highly profit oriented without focussing on the need of community or they become extremely dependent on donor funds without doing much for the well-being of community. In the context of these debates, this paper presents a delivery approach to microfinance which has brought the focus back on the community while enabling it to take charge of the programme themselves.

Indian microfinance has witnessed the peak of commercialisation when one of the largest microfinance institutions (MFIs) of the country, SKS Microfinance, offered an IPO in August, 2010. There was a lot of excitement within the sector both in favour as well as against this profit-making move of microfinance. However, things took an ugly turn in October of the same year, when a sizable number of suicides by microfinance borrowers were reported from the state of Andhra Pradesh in India. All of these borrowers were members of a large-sized commercial microfinance organisation. The commercialisation attracted a large number of investors pumping money in the sector, looking for quick returns. As investors put pressure for returns, organisations stressed more on growth and in the process compromised on standard practices of lending. This ‘anxiety for growth’ (Sriram, 2010), combined with burgeoning scale-up within the sector, created unprecedented turmoil in microfinance. The pace of growth in the MFIs operation could be sensed from the fact that the top six MFIs in Andhra Pradesh added 12.20 million clients in just four years from April 2006 to March 2010, of which 9.76 million were added in just two years from April 2008 to March 2010 (Arunachalam, 2011). This hurried growth resulted in a number of not-so-desirable practices being adopted by MFIs, the coercive collection of repayment being one of them, The portfolio size increased manifold, but the methodology to target right client was in evolving phase. With growing pressure for profit, MFIs were forced to disburse funds leading field executives to resort to unmindful disbursement of loans resulting in inappropriate targetting and multiple lending. As a result, some households in Andhra Pradesh had a total loan burden of `2,00,000 to `2,50,000 and were burdened by eight to ten loans from different MFIs (Arunachalam, 2011). The crisis deepened for borrowers with multiple loans burdened with a high rate of interest (in the range of 32–40 per cent).

The pressure from investors to maintain a healthy portfolio at any cost lead to distortion of credit practices. Loan officers often resorted to practices like humiliating the borrowers in front of everyone, taking out utensils and livestock from house, or locking the house till repayments were made. On many occasions, borrowers unable to cope with the humiliation on a daily basis, took their own lives. These suicides pointed to the profiteering of many microfinance organisations and their poor governance structures which often acted against the interest of the clients. In this market-based model, many MFIs are competing with each other and in the process they have lost the focus on the poor and started chasing numbers and targets. Alongside these approaches, an alternative delivery approach in microfinance, ‘the community-based microfinance model’ had been functioning though on a smaller scale. Considering the focus it lays on community, this approach has caught the attention of many advocates of microfinance and has been touted as the response to the problem of commercialisation in microfinance (Bateman, 2010).

In this paper, we focus on the delivery approach adopted by the People’s Rural Education Movement (PREM), a community-based microfinance organisation operating in the state of Odisha, Andhra Pradesh, Chhattisgarh and Jharkhand. The field work (October, 2011) was conducted in Berhampore, Puri and Gajapati districts of Odisha to understand its working. During the field work, consultations were held with employees and the senior management of PREM to learn about their approach of microfinance. Discussions were also held with the women beneficiaries of PREM’s microfinance programme and its affiliated organisations. The office consultations and field trips helped in triangulation as data were being collected for the case study.

In the following sections of the paper, we give broad outlines of different microfinance delivery approaches being adopted in India, and also give some details about the microfinance programme of PREM. This is followed by sharing a few insights that emerged from discussions in the field. The last section of the paper specifies the features of the community-based model of microfinance followed by PREM.

Delivery Approaches in Indian Microfinance

The Indian microfinance sector has broadly a dichotomous structure with the non-government organisation (NGO)–self help group (SHG) ¹ model of microfinance, on the one hand, and commercial microfinance, on the other hand. In the case of the NGO SHG model, NGOs play the role of a facilitator in the promotion of SHGs in rural areas with the support of grant money from various donor agencies including government agencies like the National Bank for Agriculture and Rural Development (NABARD). In fact, the NGO SHG model got its impetus from the SHG Bank Linkage Programme (SBLP) launched by NABARD in 1992–1993. The purpose of SBLP is to firstly, develop alternative credit delivery mechanism for meeting the credit needs of the poor by invoking flexibility, sensitivity and responsiveness of the informal credit system; secondly, to encourage banking activity to reach people who are usually not approached by the formal institutions and thirdly, to improve availability of credit to the poor with less transaction cost (Satish, 2001).

SBLP is India’s homegrown model of microfinance and is heavily influenced by the poverty alleviation school of microfinance. During the decade of 1990s, SHGs received maximum attention from government and donor agencies and a large number of NGOs got engaged in microfinance activities through the promotion of SHGs. There were studies conducted to demonstrate that SHG had a positive impact on economic empowerment (Harper, Esipisu, Mohanty & Rao, 1998; Puhazhendi & Badatya, 2002; Puhazhendi & Satyasai, 2000). Soon microfinance is discussed as magic bullet for empowerment (Kabeer, 2005) and almost every NGO working on issues like empowerment, governance etc., started promoting SHGs. The SHG based approach received further recognition with the launch of government-funded schemes like the Swarnjayanti Gram Swarosagar Yojna (SGSY) in 1999. The purpose of SGSY was to provide employment opportunities to the rural poor with a focus on the formation of SHGs made up of women and weaker sections of society.

However, NGOs promoting SHGs are not permitted to collect savings from the group and also they cannot lend money to SHGs because of their non-profit status. By 1998, a new form of microfinance organisation emerged in India’s microfinance sector. These are the commercial microfinance organisations, registered as a non-banking financial company ² (NBFC), taking up microfinance as a business proposition. These NBFCs, often termed as NBFC-MFIs, promoted a new delivery model for microfinance termed as the joint liability group (JLG). ³ Over a period of time, JLGs become synonymous with ‘successful microfinance’ because of its high repayment rate (Bera, 2008) and scalability. The emergence of these two different group-based approaches in India is essentially based on ‘for-profit’ and ‘not-for-profit’ differentiation (Reddy, 2012). Over the years, the microfinance sector has recognised the SHG based model as the not-for-profit model and the JLG model as the for-profit model. ⁴

The inherent contradiction between the altruistic spirits of NGOs located within the sphere of development sector, and microfinance as profit-seeking and self-sustainable endeavour has forced many MFIs to shed off the motto of ‘bottom-up’ development. The profit orientation encourages MFIs to consider themselves as service delivery agencies catering to a bottom of pyramid market and thereby generating surplus from their services. These commercial microfinance organisations adopt a supply-driven approach of microfinance and idolise microfinance as a ‘product’ which needs to be sold to the poor and needy. Commercial microfinance works around a ‘myth’ that there is a dearth of credit in the rural sector (Bateman, 2010), resulting in high demand for the same. So, there lies a huge untapped rural market for credit services. This portrayal of microfinance as a lucrative market for the financial product resulted in the appearance of many commercial investors in the Indian microfinance, who are willing to invest unprecedented amount of money. In recent years, these suppliers of capital have acted as a strong incentive for the MFIs to work as profit-seeking organisations.

The temptation to earn profit and the compulsion to remain afloat as a self- sustaining entity makes many MFIs adopt a fast-growth form of microfinance through the ‘transformation’ (Ledgerwood & White, 2006) into an NBFC. Apart from self-sustainability and profitability, triggers like expanding outreach, efficiency in operation and so on, also influenced many voluntary organisations to create a supply-driven commercial approach of microfinance (Sriram & Upadhyayula, 2002).

At this crossroad of development and commercialisation, organisations seem to take up either of the two options—working as an NGO with altruistic spirit, focussing on a small number of beneficiaries; or working as a profit-seeking, new age microfinance organisation with a focus on quick scalability of operations. But within these two extremes, there can be a midway whereby organisations can combine elements of community groups, owned and controlled structures, with some degree of scalability and outreach. This can be termed as an ‘enabling model’ because it fundamentally remains demand driven and community controlled, an important characteristics of any ‘enabling model’ (Shylendra et al., 2012). Sriram (2010) has argued that such a model is led by a people’s movement that exists beyond any government and entrepreneurial interventions. This model has emerged by organising people to sort out their financial difficulties and woven around different empowering activities other than lending. In the following sections, we make an attempt to bring forth the various features of an enabling approach of microfinance through a case study on PREM.

People’s Rural Education Movement

People’s Rural Education Movement (PREM) ⁵ is a secular, non-profit and non-political organisation located in the state of Odisha in eastern India but also works in the nearby states such as Andhra Pradesh, Chhattisgarh and Jharkhand. Its headquarters are located in Berhampur, in Ganjam District of Odisha. A few social activists, led by Jacob Thundyil and Chacko Paruvanary and inspired by Paulo Freire’s ⁶ approach to popular education and empowerment, started working in 15 villages of Odisha in 1982 (PREM, 2009). They started working on issues related to the functional literacy area. Freire’s approach on action and reflection looked suitable for activating people from a very backward region. Social mobilisation activities were taken up by PREM for addressing the social exclusion of dalits as well as the fishermen community in plain areas where the situation was acute at that time. However, in this approach of social mobilisation it was found that women were left out of the process. Hence the organisation started making forums specifically for women. It took up the task of organising tribal communities through the promotion of people’s organisations. Further in the plain areas, PREM undertook promotion of people’s organisations for pursuing child-based development. Currently PREM’s operational area covers more than 6,000 villages and nearly 2.5 million tribals in Odisha and its neighbouring states.

PREM: Major Interventions

In its early years, PREM focused on non-formal education programmes for tribal children along with forming people’s organisations. Pre-schools were opened and bridge courses as well as hostel facilities were set up by PREM in tribal villages. Often PREM has also associated itself with relief and rehabilitation work— prominent engagements took place during the droughts of 1988 and 1991 and later during the 1999 super cyclone in the Odisha. Gradually, PREM has diversified into the fields of livelihoods, agriculture, food security, savings, gender and equality, and malaria prevention and control. It aims to promote village Swaraj. ⁷ For this, PREM promotes responsible grassroots leadership in its field areas. It concentrates on capacity building and promoting gender equality and child rights. For strengthening the idea of a village Swaraj, PREM is currently working towards empowering Palli Sabha ⁸ institutions through the implementation of the Panchayati Raj Extension Act to Scheduled Areas (PESA), 1996.

PREM has formed Utkal Mahila Sanchaya Bikas o Samaj Mangal Sansthan (UMSB), an apex organisation of its SHG federations. UMSB is now a member of the Indian National Federation of Self Help Groups (INFOS)—a national forum of SHG federations which aims at capacity building, policy advocacy and self-regulation to strengthen the SHG movement in India. INFOS has a total of 120 federations. PREM is looking after the east India regional chapter of INFOS for the promotion of microfinance and SHG Federations.

Microfinance Programmes of PREM

PREM started forming people’s organisations in its field area in the early 1980s. By 1986, its outreach had extended to 200 villages. In 1984, the first block-level forum named Bapuji Gramya Kalyan Samaja (BGKS) was formed. It was created at the level of 21 Panchayats, each Panchayat being represented by a man and a woman. From 1990 onwards, separate developmental outlets for women were formed and a savings programme was initiated as part of the women’s groups. The staff of PREM visited Bangladesh as well as Sri Lanka to learn from microfinance programmes in these countries. Based on this learning PREM initiated a pilot microfinance programme in a thousand villages by forming Mahila Samitis. These were village-level groups of women which were later converted into smaller SHGs. The savings from these groups were collected by the savings collectors of the organisation. They kept all savings with UMSB. The UMSB was registered as a society in 1992 to take forward the microfinance programme of the organisation. Headed by a chief executive from PREM, its governing board constituted representatives from the federations of SHGs. At this time, UMSB received a loan of `18 lakh from banks and allowed loans up to four times of the member’s savings. The loan was to be returned in two years. In the coming years, more grants became available through the Norwegian Agency for Development Cooperation (NORAD) and Small Industries Development Bank of India (SIDBI). Twenty more federations were promoted with this support.

However, this format of the microfinance programme was found to be much too centralised and difficult to manage by PREM. So it started contemplating an alternative way of doing things. They finally decided that the groups need to be reorganised and that their savings should be managed by themselves. It was decided therefore to return all the money to the groups, collected through savings, and decentralise the structure. The saving collectors were removed and the groups were encouraged to start their own accounts in banks. The system of handling compulsory and optional savings was handed over to the groups. By 1997, the entire re-organisation work was completed.

Around this time, support from NOVIB, NORAD and SCF (Save the Children Fund) came in for the formation and capacity building of SHGs and promotion of entrepreneurship. The programme since then has crossed the boundaries of the state of Odisha. Currently, there are SHG federations in 22 districts of Odisha, 6 districts of Andhra Pradesh and 4 districts of Jharkhand and Chhattisgarh. Besides, there are 15 federations in Tamil Nadu. In the past, the funding from the private donors was the main support for promoting SHGs and their federations. Now funding support from government has increased. The federations are mostly people’s organisations at development block levels. Their executive committee is drawn from the SHGs. The federations are usually registered organisations. The members of the federations/SHGs also represent other forums, such as the Village Panchayat, Block Panchayat and District Panchayat. It helps them to tap facilities, funds and other supports available from different institutions of the Panchayat Raj system.

Promotion of Allied Organisations

Apart from promoting microfinance through direct intervention, PREM has strategically promoted allied groups of organisations to expand the microfinance operations across various states of India. Vikas Vahini, a grassroots development organisation, was started by Valerian D’Lima with support from PREM. In 1983, Valerian had undertaken a one-year course on community development and after the completion of training he worked with the United Artists’ Association, Ganjam, for the marine fisher people. From 1985 to 1990, he worked in a water and health education programme. Finding the economic situation of dalits and fisher people to be depressing, as compared to rest of the society, he and his colleagues formed the voluntary agency, Vikas Vahini, along with some local people. The aim of the agency was to intervene to change exploitative and oppressive situations, in which the weaker sections lived in. Valerian managed to secure some support from PREM for social mobilisation. The activities of Vikas Vahini are spread over 153 villages/hamlets in Brahmagiri development block of Puri district and it tries to focus on scheduled castes and fishermen communities.

Similarly, PREM had supported a total of 46 NGOs during this period. All these organisations started working in a movement mode following the Freirian methodology and tried to address social inequalities rampant in societies where they worked. In the early 1990s, most of them formed Mahila Samitis. The focus of these Samitis was social action, savings and lending. In 1992, a federation of SHGs and Mahila Samitis was formed known as DEEPICA (Downtrodden’s Emancipation and Eradication of Poverty and Injustice through Community Action) in Brahmagiri block of Puri District. With the promotion of NABARD’s SHG–bank linkage programme, these groups came to be organised in the form of SHGs. These SHGs are promoted with a voluntary action perspective based on voluntary decision structure and membership (Karlsson, Grassman & Hansson, 2002). Earlier, the federation had three layers at the village, Panchayats and block levels. Later, it became a two-layered structure consisting of village and block levels.

Lending at the rate of three per cent per month out of members’ savings is the common policy across all SHGs/federations. Sometime, in exceptional cases loans are given to the most needy and deserving members at a reduced rate of interest. In case, a bank loan is used for lending then the interest rate is 15 per cent per annum. Apart from lending which is fairly uniform across the entire structure, Vikas Vahini is engaged in social reforms and advocacy. They try to protect dalits and fishermen against discrimination by upper caste people and also address women’s atrocity and divorce related issues. Financial support from PREM is available to DEEPICA particularly when PREM tries to meet its commitments under different projects through such organisations. Apart from SHGs and associated activities Vikas Vahini also mobilises the youth and this has resulted in the emergence of a youth organisation called Yuba Shakti.

DEEPICA has a 12-member executive body and has a general body of 3,300 members. It is constituted of 164 SHGs now. The structure has a president, vice president, secretary, joint secretary and cashier. They are elected by secret ballot for a three-year term. Every quarter, a meeting of the executive body is organised. Almost all groups promoted by DEEPICA are linked to the bank. Most of the groups are from a single caste and have a substantial number of BPL families in them. DEEPICA’s role up to now as a federal body has been capacity building of SHGs, co-ordination among SHGs, conflict resolution, facilitating bank linkage, networking with government agencies and monitoring and extending supervisory support to SHGs.

Like Vikas Vahini, Lok Samiti is another organisation promoted by PREM in Rayagada block of Gajapati District of Odhisha. Lok Samiti, led by Sudhir Kanta Lima, a local tribal person, was registered in the state of Odhisha in 1996. There are a total of 42 SHGs in Lok Samiti and it has supported them to develop and grow through funding from NOVIB and NORAD. All the groups in the area have received bank loans and many of these groups have purchased land for developing cashew plantation which is very common in the area. A few SHGs are also engaged in the business of turmeric.

An informal structure, Lok Samiti Mahasangh, resembling a SHG federation has been set up in 2007 with seven executive committee members. The majority of the groups in the federation keep records of their lending and savings at their own level. The federation structure is a big help in looking after mid-day meal (MDM) schemes, public distribution system (PDS) and local control on use of alcohol. With the strengthening of the federation and women’s election to Panchayats, the situation has changed significantly in the community. The mobilisation of people in groups has enabled the Lok Samiti to address social discrimination common in the region. Earlier even taking drinking water from a common well was forbidden for scheduled tribes in their area of work. These conditions have changed since Lok Samiti started working in the region. Now even inter-community marriages are also held and many have proved successful as well.

Functioning of Groups: Insights from SHGs

Maa Harchandi SHG and Maa Basantai SHG are promoted by DEEPICA with support from PREM. The first group has 19 members. It was formed in 1994 and has a president, secretary and cashier as office bearers. The savings deposit is `30 per month; earlier, it used to be `10 per month. Most of the members are of Bhoi caste and depend on daily labour for their livelihood. The members also engage in small business activities like de-husking and sale of rice. While undertaking any group activity, they divide the work amongst themselves. The group earlier had received an assistance of `2.50 lakh under the SGSY. The group had taken up coir processing and started making various coir products. The members take loans for health care, sending children to school and income generation activities. The group also cultivates over 300 acres of land.

Maa Basantai SHG was formed in 1994 and has 15 members. Here per member monthly savings is `30. The total saving of the group is `1.25 lakh. Sometime ago, the group received a loan of `25,000 as part of the scheme—Development of Women and Child in Rural Areas (DWACRA). <sup>9</sup> It had invested the loan amount in rearing goats and in the rice business. There is no outstanding bank loan now but the internal loans given by the group amounted to about `1.5 lakh. While Maa Harchandi group distributes profits, the Maa Basantai group only adds profits to its deposits.

The Indira Vikas SHG and the Mohan SHG are the two SHGs promoted by the Lok Samiti in the village Bikrampur in Rayagada development block of Gajapati District. The Indira Vikas SHG is almost 12 years old. The group savings is `10 per month, per member. The group has inter-loaning but has not accessed any bank loan. The group takes work on contract from individuals and farmers. The group is also distributing kerosene oil for four villages. The members engage in an elaborate division of labour amongst themselves with the president and secretary being the two office bearers in the group. Apart from savings and lending, the group facilitates delivery cases of pregnant women, immunisation and treatment for serious sickness and so on.

Political Opposition

From the discussion with members of the SHGs promoted through allied organisations of PREM, it is apparent that they focus consciously on both the social and economic empowerment of the marginalised communities. Because of its involvement with social issues many political groups have risen against PREM. During 1999 and 2000, many complaints were made against the organisation. However, all these complaints were dismissed by the state government. Since then the organisation has invited political leaders from different parties to share the platform provided by the people’s forums to discuss their developmental plans and agenda. This practice has had the effect of communicating a clear message from PREM that they are not against any political party or political leadership as a class, and that they stand for specifically for the development of people.

Features of an Enabling Approach: Discussion

PREM’s experience is a concrete example of early realisation of the possible difficulties that may be faced in financial intermediation by a development organisation which has charitable motives. From its inception, PREM has been promoting community-based organisations (CBOs) to take care of their developmental interventions including microfinance. In all their programmes, the community is placed at the core with an intention of enabling the community to exercise ownership and control. PREM has avoided playing the role of an on-lending agency. The very origin of PREM was in the form of a movement and hence could have found it extremely difficult to handle both the roles together. Since then it has assumed the role of a facilitator and has tried to help CBOs to grow in the mode of a social movement organisation (SMO) by developing federated structure, using the existing infrastructures and mobilising communities under a collective action frame.

Federated Structure

PREM developed a federated structure to deal with the local environment through the promotion of community-based MFIs and small NGOs. These smaller NGOs are managed by the associates of PREM. The federated structure helped PREM to develop a loosely coupled system which is more responsive towards local needs. The responsiveness can be assessed from a bottom-up approach towards managing the microfinance groups and adoption of non-standardised procedures as in group management (e.g., varying sizes of SHGs, saving amounts and so on). Such expansion of operation through ‘cadre-driven’ independent chapters is a typical feature of SMOs (McCarthy & Sald, 1977). As in a movement, PREM has used pre-existing infrastructure to build their microfinance operations. They have used the Mahila Samitis and other community forums meant to address various local issues for microfinance operations and in the process, managed to leverage the social capital amongst group members. The microfinance groups are organised as a platform to address social and economic issues and not merely restricted to saving and credit groups. From the inception, PREM has adopted a strategy to generate collective action to address local issues ranging from livelihood creation to fighting social evils.

The federated structure has helped PREM to scale the microfinance operations without compromising on the responsiveness towards the local needs across various regions. Many of the CBOs are functioning along with small-sized NGOs which were promoted by associates and development workers of the organisation. These organisations were mainly dependent on PREM for support and guidance. This loose confederation of PREM and small development organisations has promoted the microfinance programme in the form of independent local federations and enabled them to pursue different policies in different places. This has led to a greater focus on local social issues and less on developing a uniform top-down microfinance programme. PREM has lesser control on the financial policies of the federations which reflects its lack of desire to impose its own tightly regulated programme.

Multi-activity NGO

The second important feature of PREM as an enabling model of microfinance is that it is a multi-activity NGO with microfinance being only one of its several developmental interventions. It enables any NGO to have an integrated view of problems of people and helps them address poverty and development challenges (Shylendra, Kumar & Agrawal, 2012). PREM made a purely need-based entry in microfinance at a time when microfinance was not as lucrative as it is today. Microfinance is considered as an input in the overall process of development and the portfolio of multiple activities along with microfinance have helped PREM to develop a more integrated approach to development. PREM has linked its microfinance operation with issues like tribal mobilisation and political decentralisation for ensuring tribal rights and livelihoods. The federations formed by affiliated organisations have facilitated advocacy on these issues as these are envisaged as platforms to raise issues of social concern and to initiate development interventions. Because of support from the professional staff of PREM, these community platforms have gained voices of their own and have been bargaining successfully with government agencies.

This integrated approach has helped PREM to deal with the growing pressure for a for-profit approach in microfinance. PREM has advocated for microfinance as a catalyst to ensure sustainable livelihood for the poor and in the process allowed the CBOs and their associated functionaries to decide on the issue of profit. By allowing the federations and other supporting organisations to decide on organisational policies of growth, of profitability, and so on, PREM successfully glided through the complexities of mission drift and other profit-seeking behaviour.

Targetting the Poor

The third feature of this enabling approach of PREM is the ability to target poor people and offer various services along with credit. Unlike the minimalist approach of a supply-driven commercial approach, the enabling approach is more accommodating in terms of its outreach and services. Because of its loosely coupled structure, PREM has been able to target mainly poor and disadvantaged households in rural areas. With a bottom-up approach, the CBOs have been able to include families of marginal farmers, fishermen, tribes as their beneficiaries. The flexibility in product design to attend the local need has avoided exclusion of the poor which is otherwise the first casualty of microfinance scaling. In all these years, PREM has promoted 2,572 SHGs with 42,526 members comprising needy and disadvantaged groups. These may look like a moderate level of growth when compared with fast-growing commercial microfinance organisations. But the moderate growth is justified in view of a long-term focus on sustainability and concerns for social issues in groups. In terms of microfinance services, PREM also offers insurance services apart from savings and credits.

Conclusion

Overall, the model of microfinance discussed in the paper has been able to combine the goodness of both schools of microfinance–poverty alleviation and financial sustainability, by ensuring scalability and outreach while protecting attributes like flexibility, inclusiveness and poverty focus. PREM has been able to avoid the organisational complexities of organisations like Building Resources across Communities (BRAC) created due to expansion (Mannan, 2009) and still successfully combined the features of a non-profit organisation and professional approach of a for-profit organisation. The microfinance model of PREM is to be evaluated within the broad framework of a movement and need not be restricted within the paradigm of financial services for inclusivity.

By the end of March 2016, PREM is serving 2,572 SHGs and 45 federated structures. Most of lending activities take place from savings vested with SHGs. Bank linkage is very limited. The total saving of SHGs is around `121,694,742 as compared to loan amount of `2,000,720 availed from external agencies. The loan outstanding is `85 lakh by the end of March 2016. The dilemma of microfinance can be resolved to a large extent by an approach focussing on CBOs with a motive for empowerment and development. This delivery approach can successfully adopt a middle path between the two extremes of altruistic non-profit NGOs lacking a professional approach and profit-driven commercial microfinance lacking empathy for the poor. In such initiatives, however, the need for an efficient management of information system (MIS) is vital as such programmes are often mediated through multiple organisational structures under the overall leadership of any enabling and supervisory organisation. PREM is the instance of such a supervisory organisation in this case. This will help them make multiple uses of members’ idle savings for greater benefits of SHG members.