The Centrality of Relationships in Microfinance: A Case Study of Two MFOs in South India

Microfinance is by nature a social banking venture. As such, the role of relationships is central to the approach and delivery mechanisms of the financial services. Although many studies have been conducted in regards to the efficiency of microfinance, the relationships that form and affect the approach and delivery mechanisms of microfinance have been largely overlooked. In order to remedy this oversight and better understand the relationship structures in the practice of microfinance in India, this project analyzes two particular relationships; the relationship between the microfinance providing organization and its clients, and the intra group relationships within the client focus groups. The field research consists of a case study of two microfinance providing organizations in the south Indian state of Tamil Nadu. The data illustrates that there are two key features that are characteristic of each relationship. The data analysis indicates that these features not only form the basis of these relationships, but can work both in the favor of and in some instances against the sustainability of one or both of the relationships considered. Understanding the fabric of these relationships will enable those in the field of microfinance to provide financial services to their target clientele in a more effective and sustainable manner.No embarg