Capital, Group Structure, and the Sustainable Development Goals: a Production-function Framework for India’s Microfinance Sector
Year: 2026
Type: article
Abstract: Achieving the Sustainable Development Goals (SDGs) by 2030 requires both more capital and better-allocated capital. India operates the world’s largest microfinance system, making it an instructive case for sustainable-finance allocation. The Indian randomised controlled trial record reveals an underexploited pattern: credit-only interventions raise enterprise investment but not children’s education; group-formation interventions do the opposite; only combined interventions move both. We formalise this pattern with a household production model in which credit liquidity and group infrastructure are distinct inputs whose relative importance varies by outcome. We then introduce an evidence-rupee gap diagnostic that compares where capital flows to where rigorous causal evidence supports impact claims. Three sectoral analyses follow. First, a decomposition of FY20-FY24 portfolio growth attributes 47% to per-borrower deepening, 37% to new borrowers, and 15% to interaction. Second, the diagnostic yields a sectoral mismatch of 0.35, driven by income-generation lending where average causal effects are modest. Third, FY25 data show a sharp channel reversal, the MFI/JLG channel contracted by 14% while SHG-BLP grew by 17%. The framework supports rebalancing Priority Sector Lending incentives toward channels with the strongest India-specific evidence, and commissioning the primary research the income-generation channel still lacks.
DOI: 10.36713/epra28915
Authors: Chetna Grewal, Ashok Kumar Gupta
Institution: Shobhit University
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W7204185519