Advertisement
Tuesday, Oct 26, 2021
Outlook.com

Small Change

High rates, extortionary practices are the reality. But the big fish are moving into microfinance.

Small Change
R. Prasad
Small Change
outlookindia.com
-0001-11-30T00:00:00+05:53
The future, said management scientist C.K. Prahlad, lies with those that see the poor as their customer. And microfinance institutions (MFIS) have been the biggest beneficiary of this vision. The Nobel Peace award to Mohammed Yunus and his Grameen Bank, the first successful MFI in the world, lends strength to such efforts in India, which is attracting huge amounts through venture capital funding, and is now seen as the only hope for the 97 per cent of the poor, who have zero access to credit.

Of late, the sector has come under heavy flak in some states for exorbitant rates and extortionary recovery practices. India is probably the largest market for microfinance services, attracting unprecedented investors like technopreneur Vinod Khosla. Growth has been a scorching 20 per cent plus, with some outfits growing even at 150-200 per cent. Some 2.23 million self-help groups (SHGs) are now linked to the formal banking sector, compared to 1.16 million in March 2005, says NABARD. Nearly 78 per cent of the members are rural, 95 per cent among them women. Retail banks like ICICI, HDFC, Citibank, ABN-Amro and Stanchart have also entered the fray. With innovative instruments like securitisation of debt and I-cards, ICICI has already cornered 40 per cent of the banks' business. On March 31, 2006, ICICI had 102 MF partners with cumulative outstandings of Rs 2,350 crore against over 3 million low-income clients.

Says Nachiket Mor, executive director, ICICI Bank: "Out of the Rs 40,000-crore annual demand in rural India, barely Rs 2,000 crore is met by banks. Microfinance is still a tiny fraction of this, simply because its growth has been severely restricted. But it remains a sector with huge potential." ICICI estimates the market (including...
Advertisement

Outlook Newsletters

Advertisement
Advertisement
Advertisement

Read More from Outlook

Bombay High Court Adjourns Aryan Khan's Bail Application Till Tomorrow

Bombay High Court Adjourns Aryan Khan's Bail Application Till Tomorrow

Former Attorney General of India (AGI) Mukul Rohatgi appeared for Shah Rukh Khan’s son Aryan Khan, along with his existing legal counsel comprising Satish Manishinde and Amit Desai.

Explainer | Why A Lawyer Is Seeking FIR Against NCB's Wankhede For 'Extortion' In Aryan Khan Drugs Case

Explainer | Why A Lawyer Is Seeking FIR Against NCB's Wankhede For 'Extortion' In Aryan Khan Drugs Case

On Monday, a lawyer approached the Mumbai police with a complaint seeking registration of an FIR against Sameer Wankhede and five others for extortion in the drugs-on-cruise case.

IPL Controversy: CVC Capital Under BCCI Scanner

IPL Controversy: CVC Capital Under BCCI Scanner

The BCCI on Monday named RPSG Ventures Limited and Irelia Company Pte Ltd. (CVC Capital Partners) as owners of the new IPL teams from 2022.

'TMC & AAP On A Mission To Split Congress Votes And Help BJP In Goa': State Congress Chief

'TMC & AAP On A Mission To Split Congress Votes And Help BJP In Goa': State Congress Chief

Goa Congress president Girish Chodankar strongly asserted that the voters cannot be wooed with false promises and money as people are deeply rooted in the Congress.

Advertisement