Business Correspondent Model and its Contribution to Microfinance Sector of India

It is now widely acknowledged that microfinance sector has had a positive impact on poverty reduction and women empowerment. The growth of the sector is powered by the business correspondent (BC) model. Using secondary data, this article makes an attempt to give an overview of how microfinance institutions (MFIs) acting as BCs partner with banks and other financial institutions. Though BC partnership with banks had flourished, lately they tend to shift towards non-banking financial companies. The paper also discusses the major challenges that MFIs face as BCs and the ways to overcome. This paper argues that the Reserve Bank of India has a larger role to play in harnessing the orderly growth of MFIs as BCs in the country.