Keya Sarkar: Micro finance lessons at IIM Bangalore
OUT OF FOCUS
Keya Sarkar / New Delhi January 27, 2006
Until recently mainstream banks were uninterested in micro finance or
lending to the poor in amounts of less than Rs 20,000. But with the
competition for upper end and middle end personal finance business worsening
among the banks, many of them turned their attention to the rural and urban
poor as a new and emerging asset class.
Since many of the banks did not have the administrative capacity to deal
with such small loans, most adopted the route of refinancing micro finance
companies. In their efforts to do so, many realised that there were only a
handful of micro finance institutions (MFIs) that could be refinanced.
Although different practitioners in the sector gave different figures as to
how many bankable MFIs there are, it would be safe to say that the number of
good MFIs is around 15.
Understandably, these 15, in the last two years, have been wooed by banks.
Over this period, the discerning observer has noticed a situation of banks
having the money and inclination to lend, but there is a paucity of
borrowers. There is of course a huge number of NGOs which are now
increasingly including micro financing as one of their activities, but banks
have been uncomfortable about lending to them, with of course a few
exceptions—primarily because NGOs which have traditionally worked in the
social sector have not had the kind of financial discipline that banks are
looking for.
So the need of the hour was to set up micro finance companies. Global micro
finance venture funds have thus turned their attention to India and the
Bellwether Fund, Unitus and many more have started operations. Two hurdles
have been the most difficult to overcome in funding start-ups.
The first has been the issue of obtaining NBFC registration and the other
has been manpower. Since this sector had been stagnant for so long, it had
failed to attract quality people. The result was the usual—the talented few
were hopping from company to company. Many organisations within the sector
which had also started a training arm (the Dhan Foundation, Basix, Sewa,
FWWB, Sadhan, etc.) had been making an effort to raise the skill levels of
those already working in the sector.
But it seems that the Indian Institute of Management, Bangalore, has
pioneered a course to teach the essence of micro finance to talented people
coming to work in the micro finance sector for the first time.
contd....
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