Narrowing Benefits: Multiple Borrowings

In the past few years, Indian microfinance has seen unprecedented growth. The microfinance sector in India is growing despite a legal vacuum. In fact, seven Indian MFIs ranked in the worlds top fifty MFIs in 2007. This trend is reinforced by and further accelerates commercialization of the industry, which is in turn characterized by increased competition among MFIs for clients and a goal to seek profitability. 

Despite this growth, there is considerable unmet demand in India. According to World Bank (2006), only 9% of poor families in India have access to microfinance and of the projected credit requirement of US$ 10909 million, only US$ 1050 million is met by microfinance. Although demand is widespread, the geographic distribution of MFIs is not uniform. Fast growing MFIs tend to expand to areas where there is already an incumbent. The reason for this strategy is to leverage training and screening of client by the incumbent MFI and general awareness of microfinance in the area.