<abstract xmlns="http://www.w3.org/1999/xhtml"><p> Microfinance institutions (MFIs) have stepped up towards commercialization and sustainability yet they face challenges in terms of transaction cost that limit their growth prospects. Transaction cost is incurred in forming the group of members, searching for the potential clients, monitoring, and administration, in providing training to the clients etc. Group lending has emerged as an effective tool in reducing this cost by transferring its burden on the group. Though the concept of group lending is not new in micro finance but in India it was introduced by NABARD in 2004-05 owing to its key advantage of income generation. This paper aims to analyze whether group lending programme has some role to play in reducing transaction cost of MFIs. It also discusses the concept of transaction cost, characteristics of group lending as well as process of forming a group. The results reveal that internal management of small and medium MFIs is not working efficiently which results in increased costs. Large MFIs do not face such problems.</p></abstract>

Microfinance institutions (MFIs) have stepped up towards commercialization and sustainability yet they face challenges in terms of transaction cost that limit their growth prospects. Transaction cost is incurred in forming the group of members, searching for the potential clients, monitoring, and administration, in providing training to the clients etc. Group lending has emerged as an effective tool in reducing this cost by transferring its burden on the group. Though the concept of group lending is not new in micro finance but in India it was introduced by NABARD in 2004-05 owing to its key advantage of income generation. This paper aims to analyze whether group lending programme has some role to play in reducing transaction cost of MFIs. It also discusses the concept of transaction cost, characteristics of group lending as well as process of forming a group. The results reveal that internal management of small and medium MFIs is not working efficiently which results in increased costs. Large MFIs do not face such problems.

Group Lending Model - A Panacea to Reduce Transaction Cost?

Zagreb International Review of Economics and Business

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

{"article-title":"Group Lending Model - A Panacea to Reduce Transaction Cost?"}

Microfinance institutions (MFIs) have stepped up towards commercialization and sustainability yet they face challenges in terms of transaction cost that limit...

Group Lending Model - A Panacea to Reduce Transaction Cost?

Pubblicato online: 30 nov 2017

Pagine: 49 - 63

DOI: https://doi.org/10.1515/zireb-2017-0017

Parole chiave
Micro Finance Institutions, Transaction cost, Joint Liability Group

© 2017

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Group Lending Model - A Panacea to Reduce Transaction Cost?

Pubblicato online: 30 nov 2017

Pagine: 49 - 63

DOI: https://doi.org/10.1515/zireb-2017-0017

Parole chiaveMicro Finance Institutions, Transaction cost, Joint Liability Group

© 2017

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Parole chiave
Micro Finance Institutions, Transaction cost, Joint Liability Group