Building a Model Microfinance Institution: The Case of Sanghamithra Rural Financial Services
This case study describes the dilemma that the Board of Friends of Women's World Banking (FWWB) faced when it had to decide whether to promote a non-banking finance company (NBFC) and convert FWWB's credit program into a regulated structure.
FWWB provides wholesale loan funds and technical and capacity building support services to NGOs and MFIs that work for the upliftment of women. FWWB thought of transformation as a response to challenges such as increase in demand for funds, dropping out of old partners and entry of new partners and geographic concentration of its activities. Transformation into an NBFC, however, would expose FWWB to challenges that included:
- Raising large amounts of equity capital;
- Loss of autonomy;
- Difficulty in becoming sustainable;
- Being subjected to excessive and frequent regulation.
The Board revisited FWWB's mission, vision and core mandate. It was felt that transformation into an NBFC might lead to mission drift. It would also be difficult for the new NBFC to compete with private banks. Finally, however, the Board decided to go ahead with the plan of converting FWWB's credit program into an NBFC structure.
