An institutional logics perspective to evolution of Indian microcredit business models

Abstract

Ins tu onal de elo ment o microcredit in India has been in uenced by lobal ressures, interins tu onal contradic ons, and intrains tu onal con icts in lo ics. he hybrid model used in India o en created dissonance amon ins tu ons that o erated or a common cause with com etin lo ics. Lo ics clashed and di erences in their le i macy and sustainability status resulted in mission dri , in a or o the dominant ins tu onal actor. Desi n issues in social enter rises can result in ailed alliances e en when a rowin mar et e ists and has acilitated e erimenta on or years.

The Failure of Hybrid Organizations: A Legitimation Perspective

“…This trend of commercialisation is now common in the industry. More recent research has identified the organizational tensions that exist when MFOs look to integrate profit-driven and poverty reduction ideals (Parekh & Ashta, 2018). As such, the development logic co-exists with a more utilitaristic, economic banking logic which shapes organizational strategy.…”

Can behavioral biases improve the financial capability of microfinance clients in the tribal states of India?

“…Around 1992, NABARD launched the SHG bank linkage program to reach out to the more rural households through microcredit for meeting all purposes, including consumptions needs (RBI, 2008). Moreover, to bridge the credit gap, many nongovernmental organizations (NGOs) and private financial institutions (MFIs) have adopted MF models through JLGs and SHGs (Kelkar, 2008; Mader, 2013; Parekh & Ashta, 2018). However, low‐income groups accessing their entire credit demand from these formalized models has been low.…”

“…Low‐income households claim that accessing credit from formal sources is too expensive (Milana & Ashta, 2020). Therefore, they continue to access credit from informal moneylenders for their consumption needs as, here, the process of accessing credit is more straightforward and does not involve nonprice barriers and transaction costs (Parekh & Ashta, 2018). The committee, chaired by Rangarajan (2008), outlined several strategies to ensure that they are financially included.…”

“…Though several efforts by the government and the banking institutions brought many of the unbanked households to the banking network, the target of the real usage of financial services, especially credit from the banks that help these households to move out of poverty, is not achieved (Bhanot, Bapat, & Bera, 2012; RBI, 2019; Sophia, 2014; Thangasamy, 2014). To bridge this gap, microfinance (MF) models emerged formally (registered MF organizations) and informally (community‐based savings and credit organizations) to help households access financial products to meet their day‐to‐day needs or even to create small assets (Kelkar, 2008; Parekh & Ashta, 2018). However, the reach of formal microfinance institutions (MFIs) to remote areas like northeastern (NE) states is restricted (Kshetrimayum, 2012).…”

“…Many households still access credit from individual moneylenders even if it is at a high cost, to avoid nonprice barriers (such as attending group meetings and making standardized loan repayment) (National Sample Survey Organisation [NSSO], 2014; Parekh & Ashta, 2018; Ramadorai, 2017). Their exclusion from formal banking and formal MF systems is not only due to the remoteness of their localities and the hilly terrain which makes accessing these services more challenging but also due to the lack of financial capability (FC) of the households in terms of knowledge about such programs, attitudes toward joining those programs, and poor management of their money and resources (Blake & de Jong, 2008; Shankar, 2015).…”