An analysis of the multifarious loan disbursement models adopted by Microfinance organizations targeting either or both urban and rural poor

Abstract

Providing financial services to the poor people is costly, in part because they have small amounts of money, sometimes live in sparsely populated areas, and rarely have documented credit histories. During the past few decades, specialised Microfinance institutions (MFIs) have begun to solve the latter problem by developing techniques that permit safe lending in the absence of borrowers’ credit histories. The Bank Linkage model adopted by some of the commercial banks in the blessings of NABARD has also resolved the problem to some extent. These processes by which loans are delivered, aim to increase the value of the product to the client, while simultaneously decreasing the risk and the costs to the institution. MFIs have accumulated strong experience in various methodologies, and there are as many methodologies and adaptations as micro-credit operations.