An Industry Note Microfinance Institutions Promoting Market Linkages in India

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"I would say that I did something that challenged the banking world. Conventional banks look for the rich; we look for the absolutely poor. All people are entrepreneurs, but many don't have the opportunity to find that out." ¹,²

- Mohammad Yunus³, Nobel Peace Prize Winner, in October 2006.

"Suppose I give a woman a loan to buy a buffalo, she doesn't have access to graze land, veterinary services, and milk marketing linkages. That loan is a burden. They are not going to overcome poverty with that sort of assistance. But if you help them with business advice, market linkages, and technology and then give them the loan, they can then overcome poverty." ⁴

- Vijay Mahajan, Founder of BASIX⁵, in November 2008.

Introduction

Microfinance institutions (MFIs) have reached out to the marginalized low income households in India, aiming to liberate them from the high interest regime of moneylenders and improve their economic and social status. By doing so, they have not only provided these households with access to institutional credit but also expanded their own outreach and portfolio of loans. However, MFIs realized early on that credit alone could not improve the income of their clients as there were other constraints such as post-harvest losses, dearth of storage facilities, absence of proper market linkages, inadequate supply chain infrastructure, poor knowledge about the best practices in their occupation, etc...

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1] Ishaan Tharoor, "Q&A Muhammad Yunus," www.time.com, October 16, 2006.

2] This answer was in response to the question: "What singular achievement do you take most pride in?"

3] Mohammad Yunus founded the Grameen Bank in Bangladesh and pioneered the concept of microfinance. In 2006, Muhammad Yunus and the Grameen Bank were jointly awarded the Nobel Peace Prize.

4] Shriya Mohan, "When the Poor Became Profitable," Tehelka, November 22, 2008.

5] Set up in 1996, Hyderabad-based BASIX was involved in microfinance, livelihood promotion, training, and institutional development.