At the Cross Roads: A Case Study of The IGFS Model of Microfinance

Abstract

This case study tracks the unique IGFS model of financial inclusion, which focusses exclusively on promoting financial products and services for the poor, based on needassessment, but not with the objective to achieve a business target. The aim is to ensure an overall well-being of the beneficiaries through wealth creation following a demand-based approach. The model has a basket of products, viz. savings, credit, insurance, pension schemes and money transfers for the poor, as defined in the scope of financial inclusion by the Reserve Bank of India. Loans are given through Joint Liability Groups (JLG) with an emphasis on ensuring that quality groups are formed. In order to achieve this objective, training of the members of the Joint Liability Groups prior to loan disbursement is
compulsory so that they understand their rights and obligations in its totality. Unlike other microfinance institutions, the activities of IGFS were not confined only to distribution of micro-credit but on all products leading to the overall welfare of the beneficiaries.

The model is currently going through a turbulent phase because of intense competition, changing service expectation of the clients, pressure to increase volumes for sustainability and managing the balance between ensuring group quality with a quick turn-around time period. Competition has adversely affected the willingness of the JLG members to enforce the contractual norms among the peers in case of default.