India Focus Note 26: Market Strategy Development and 3rd Generation Microfinance in India

The “product-centric” approach of the first and the second generation microfinance (SHG-Bank linkage and the MFI led JLG model respectively) has proved rather inadequate to face up the challenges posed by the fierce competition resulting from a glut in microfinance service providers in certain regions. Response to these challenges calls for emergence of the third generation (3G) of MFIs that make a “tectonic shift” to the “client-centric” approach. The 3G-MFIs will put the client back at the centre of their business and will be early adopters of technology to unlock the benefits of cost reduction and efficiency.

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