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Endnotes
1 The main objective is often regarded as poverty alleviation, but financial inclusion subsumes this
objective as long as reaching the poor (or maximizing depth of outreach) is given equal attention in
product design, delivery systems and monitoring. A few microfinance institutions (MFIs) do lend only
to the poor through careful targeting, but microfinance proponents need to be realistic about the
limits to which microfinance can reach the bottom decile of the population, whose poverty is more the
result of factors such as old age, ill-health and disablement, which are more efficiently tackled
through income transfer or social security programmes. There is however scope for closer linkages
between social security and microfinance programmes for the poorest and destitute (Sinha and Rasmussen
(Forthcoming)). For some of the other limitations of microfinance as a stand-alone means of reaching
the poor, and respects in which it has to be complemented by other inputs and services, see Vijay
Mahajan (2005).
2 The World Bank-NCAER Rural Financial Access Survey for AP and UP found that only 21 percent of rural
households have access to formal sector credit, although as many as 41 percent had a deposit account
in a formal institution (Basu and Srivastava 2005))
3 See Chapter 2 for support for the following data and assumptions: 2.23 million groups minus an
estimated 10 percent of groups no longer functioning, with 14 members each, of which 51 percent are
poor. This estimate includes all groups still functioning, even though they may not be currently linked
(borrowing from the banks).
4 7.3 million was the outreach of all Sa-Dhan members in March 2006, and is assumed to constitute 95
percent of all MFI borrowers (see Chapter 3). Of MFI borrowers, the proportion below the poverty line
is assumed to be 43 percent (see EDA (2005) and Box 1.1), and the total number of poor households
is assumed to be 75 million. Within the average of 43 percent MFIs lending to 5-member Grameen
groups tend to have higher poverty coverage than those lending to SHGs or making individual loans
(EDA (2005))
5 The proportion of the credit requirements of both these segments that is actually met, especially of the
un-banked non-poor, is much lower than their share of persons reached (i.e. served at all). A useful
back of the envelope estimate of the demand for credit is contained in Mahajan and Romola (2003).
6 The word "sector" is used in this report to refer to the development and financial movement that
constitutes microfinance, rather than "industry", just as "member" is generally used in preference to
"client".
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