Community-Based Enabling Models of Microfinance: Praxis and Lessons from India

Microfinance, having emerged as a widespread phenomenon, is commonly dominated by the approach advocating undue financial and commercial orientation. Microfinance interventions following such an approach have come under severe scrutiny due to a series of crises encountered by them. This paper is an attempt in the direction of guiding the debate over microfinance in a more meaningful way by capturing the experience of interventions based on alternative approaches, especially focusing on community based enabling models. The enabling models emphasise on creating collectives whereby members can exercise control and ownership providing apparently several advantages. By bringing community issues to the fore they help resolve many of the contradictions that go with the delivery of microfinance. The experience, however, shows that enabling models are faced with several challenges in realising their full potential be it in terms of their form, outreach or depth of services or ability to tap developmental links for creating holistic impact. The paper identifies policy implications for strengthening the enabling models like creating suitable legal framework for community based structures, ensuring resource support for the process of social intermediation and capacity building, providing adequate and cheaper public funds for meeting their loan fund needs, and boosting the linkages between microfinance and other developmental programmes.