The SIDBI foundation for Microcredit (SFMC) Background The SIDBI Foundation for microcredit (SFMC) is a department of Small Industries Development Bank of India (SIDBI) and a non-governmental organization that provides bulk loans to Microfinance institutions (MFIs) in India. In practice, it acts as an oversight over MFIs which are the intermediaries between the retail borrowers consisting of poor people and individual borrowers living in rural areas or urban slums and the public sector development finance institutions. The SFMC plays an increasingly important role in providing ‘user-friendly’ formal financial services to the poor due to the failure of the main poverty alleviation programme - the Integrated Rural Development Programme (IRDP). Extensive malpractices, misutilisation of funds and low repayment rates (25-33 percent) have urged a shift towards semi-formal development finance institutions. This pattern of an increasing involvement of financial institutions with micro-finance in developing countries follows on the success stories within the Commercial Bank of Zimbabwe and Cooperative Bank of Kenya. Methodology Currently, the SFMC provides funds for on-lending and capacity building support to 44 MFIs with over 1.3 million members. The majority of MFIs operated under a self-help group model (SHG). 90 percent of its total members are concentrated in the southern states, with 78 percent of them operating within a rural environment and a 95 percent membership rate among women. Rural farmers were targeted because of their perceived needs for micro-credit, used either to invest in productive activities or correct income shortfalls resulting from adverse harvest outcomes. At the same time, women were placed at the forefront because they tend to be more willing to attend group meetings and adhere to loan and savings conditions. Moreover, they were almost more likely to reinvest in the household needs of their families. Outcomes An impact survey was commissioned by the SFMC from 2002 to 2006 to study the impacts of its programs. The average loan over this period was Rs. 9,100 ($165), and 72 per cent of this amount was used for investment (animals and non-farm enterprises), while the remaining 28 per cent was used to meet household needs (healthcare, food and marriage dowries). Dependency burden More importantly, since micro-credit represents only one source of loans, some reduction on the dependence on informal sources like moneylenders and family friends was noted. Specifically, the dependency ratio on moneylenders fell from 44 percent to 34 percent, while borrowing from other informal sources fell from