History

Madura Micro Finance was established as a non-banking finance company (NBFC) in 2005 and received its license from the RBI in early 2006. Madura, although a relatively new company, carries a legacy that began at the erstwhile Bank of Madura.

At the Bank of Madura, beginning in 1995, the late Dr. K.M. Thiagarajan, the then Chairman and CEO, experimented with a new model of SHG training and lending as a means to create a sustainable profit based model of rural lending. The goal was to develop a system that would be appropriate for mainstream banking and therefore bring infusions of low-interest capital into rural areas on a scale that would be untenable for non-profit organizations. As part of this effort, 95 rural branches of the bank were developed and equipped for this operation. This effort was successful in rejuvenating and expanding the business of rural branches and transforming rural banking into a distinct business activity with profit potential. By the year 2000 Bank of Madura had developed 1500 SHGs, the largest SHG project undertaken directly by a commercial bank.

A study of this program conducted by the National Bank for Agriculture and Rural Development (NABARD), one of the nodal agencies in India for SHGs and microcredit, concluded that the "Bank of Madura - SHG project" was "a success… Considering the achievements during the short span of the project, (it) is in (a) true sense a successful project in terms of social and economic gains to the rural poor women. It is an integrated rural development project without subsidy but with cent percent repayment, resulting in effective use of credit and creation of productive assets." Bank of Madura also received special mention in NABARD's report 'NABARD and Microfinance' as the No.1 SHG model in India. This led to the recognition that the microcredit segment can become part of mainstream banking if appropriate institutional and market mechanisms are created.

In 2000, the Bank of Madura was merged with ICICI Bank where the SHG lending operations were rapidly scaled over five fold. During this time the late Dr. K.M. Thiagarajan retired from mainstream banking and founded Microcredit Foundation of India, a not-for-profit section 25 company where he intended to pilot the development of sustainable models for delivery of banking and other services to the rural poor. In 2003, however, Microcredit Foundation of India (MFI) took over the management of these SHGs in Tamil Nadu in a partnership model with ICICI Bank, which had by then been expanded to 10,000 and continued to grow. However as a not-for-profit company, MFI had limitations in its ability to grow and establish scalable mechanisms for lending. Madura Micro Finance was thus established as a more sustainable and scalable business model. Over the next few years SHG members managed by Microcredit Foundation joined Madura as borrowers after they had successfully repaid their microloans from ICICI Bank. As Madura grew, many of the field staff and management that had pioneered the SHG model at Bank of Madura returned to take positions of responsibility and carry on its mission through this new vehicle.