**Microfinance Focus conducted an opinion poll during the Microfinance
India Summit 2009 held in New Delhi last week. The poll has established
certain trends for some key issues including, “Transparency”, “Regulation”,
“Mission drift”, “Cap on interest rate” and “Livelihoods” in the Indian
Microfinance sector. Of those who were present at the venue, 165 delegates,
representing some key stakeholders in the sector participated in the poll,
making it significant and truly reflective.
Interestingly, not many respondents believe that Indian microfinance
Institutions are honest enough to promote transparency. Nearly 57% said
'No', while 24% said 'yes'. Those who had opted for 'Can't say’ were at 19%.
The response to our question whether the industry requires a uniform
regulation, the answer was quite emphatic with 87% saying 'yes'. Only 9%
said 'no' and 4% said 'can't say".
One suggestion by Shachikant, Secretary, Prepared, was:"MFIs should make one
uniform platform like banks to stop multiple financing and over financing.
MFIs need very cautious in evaluating the repayment capacity of clients and
should stop top up loans unless there is a specific purpose. Promote small
NGOs and organizations in the sector, which require seed capital to start."
Another concern in the sector is that many MFIs are increasing their
emphasis on commercialization or drifting away from helping the poor. When
asked this question, only 67% said 'yes', 20% said 'no' and the rest opted
'can't say' option. One question that haunts the sector is that of high
interest rates charged by MFIs.
When Microfinance Focus asked whether the government should put a cap on
interest rates charged by MFIs, the answer was an emphatic 'no' but more
than one-third of the respondents were positive to the idea. Out of 165
responses, 39% said 'yes' and 51% said 'no', while 10% said 'can't say'.
One of the respondents, Mr. P. Kannan, DGM - Fund raising (Head), of
Chennai-based Grama Vidiyal Microfinance, says, "If we do consider that MFIs
facilitate/enable financial inclusion and of late, the current trend is
towards commercialization, is pushing mission drift in Indian MFIs, then it
is really apt and necessary for the government to impose a cap on interest
rates charged by MFIs, so that the real purpose of "financial inclusion" is
not defeated. Also the MFIs shouldn't take it for granted that the poor are
another wholesale market for business opportunity."
The question on livelihoods which has been included to get a response on the
importance of livelihoods agenda for MFIs in the country was an overwhelming
'yes'. When asked whether MFIs should expand into providing livelihood
services, 83% said 'yes', 13% said 'no' and 4% said 'can't say'. The
reasoning is simple. Explains, Mr. Sharad Verma, Programme Officer, FWWB,
Ahmedabad: "I strongly feel after spending two-and-a-half years in
monitoring MFIs that purely micro credit activities are not going to help
the Indian MF sector. MFIs should provide vocational training and skill
enhancement training to clients in rural areas for their financial
uplifting/sustainability."
Finally, an opinion by a respondent, who preferred to remain anonymous, sums
up briefly the state of the microfinance industry:"MF industry is struggling
with the historical baggage of social development, the basic premise on
which the whole movement had begun. Now with majority of the MF players
going for stringently regulated legal entities and having to adopt banking
processes and systems, they are grappling with whether to transform
completely and entirely into a commercial financial institution or to
continue adhering to social development causes which will hamper their
growth and expansion as a commercial financial institution."
Read more at : www.microfinancefocus.com/news
Vikash Kumar
*Executive Director | Microfinance Focus *
[Non-text portions of this message have been removed]
