Microfinance catching up among rural poor

By P. Vikram Reddy

HYDERABAD, APRIL 1. From Bosnia, and Kosovo to Mozambique and the Republic of Mali, or back home in India, from one continent to another, cutting across race, religion and the nation's political status, microfinance is one concept which is making an impact on the below poverty level population.

In these days of globalisation, liberalisation and `reforms', where profitability and `viability' of operations are the only consideration, microfinance is proving itself to be a successful phenomenon.

Whether it is the self-help group, micro-credit operations undertaken by non-governmental organisations (NGOs), or the Government sponsored programme such as the development of women and child in rural areas (DWCRA), they have one thing in common. They are experimenting and learning from history. Learning to make microfinance operations a profitable and sustainable operation. In the process to improve the standard of life of the rural poor.

And as Mr. Udaia Kumar, Managing Director of Share Microfin, says ``Bankers are now realising that poor people are bankable''. How else would one explain the case of private commercial banks willingness to support micro-credit operations of NBFCs such as Share Microfin and Basics among others.

Diversification is reflected in the fact that more than 15 organisations registered as NBFCs are into this activity, including Share Microfin and Basics. On the other hand, estimates put the NGOs nationwide at over 900, who are also into mircocredit.

With 500 employees, it has disbursed over Rs. 75 crores to poor women. The strategy is simple. Women clients are allowed access to small loans of Rs. 4,000 to Rs. 10,000 and seasonal loans of Rs. 3,000 to Rs. 5,000. This could be as little as a few hundreds depending on the need of the client and the proposal.

Qualifications could vary from skills in selling vegetables to manning a small store or ability in professions such as carpentry. Women are formed into groups of five with eight such groups forming a centre. Training is first imparted on disbursement and monitoring of loans, credit discipline, rules of transactions, signatures and social development like developing kitchen gardening, hygiene and education for children.

The impact, he says has been positive with income increases ranging from Rs. 30 to Rs. 250 a day. And most importantly, they have proven that such operations are viable, with repayments being 100 per cent!

Success brings with it more success. And banks such as the SIDBI (Rs. 8 crores), ICICI (Rs. 2 crores), Global Trust Bank (Rs. 1.40 crores), Andhra Bank Housing Finance, Oriental Bank, and even the Deutche Bank (Rs. 3 crores), and Dexia (Luxembourg, Rs. 2.7 crores) have lent a helping hand to make the saga a success. What's more, Share Microfin is even planning a dividend this year!

Share Microfin started off with a capital of Rs. 5 crore contribution from 30,000 poor women. But Mr. Kumar has even bigger ambitions. He would like to reach a large group of 1.7 million poor in Andhra Pradesh, Madhya Pradesh and Orissa by the year 2005, with an astronomical Rs. 961 crores. Will such a dream be achieved?

Basics, which had initial funding from the Ford Foundation and Swiss Agency for development and Cooperation (SDC), as also Ratan Tata Trust, has disbursed Rs. 45 crores and outstandings amount to about Rs. 20 crores. Mr. Viswanath Prasad, Vice-President, Basics, says they have reached about 35,000 mostly through individual loans, with 25 per cent through self-help groups. According to available statistics, total outstandings in microfinance operations, including NBFCs and NGOs, are about Rs. 300 crores. The same sources put the number of families covered by microcredit at 19 lakh families in last decade or so.

The DWCRA has set an example in Andhra Pradesh, with the likes of Mr. Bill Clinton and Mr. Kofi Annan (UN Secretary General) appreciating the concept. Though a national programme, AP has drawn attention because, the scheme which was started with 15 women with each contributing one rupee a day, has grown to a corpus of $180 million in a short time. These groups produce as many as 400 products, and the Chief Minister, Mr. N. Chandrababu Naidu, has gone to the extent of suggesting that they adopt sophisticated technology such as Internet to sell the products, which include wooden toys, pickles, garments, among others.

Mrs. Degala Lakshmi of Narsapur (West Godavari-AP) of DWCRA has even gone to the U.S. to meet Mr. Bill Clinton last year. She had the honour of presenting a shawl to Mr. Kofi Annan, during the latter's visit to Hyderabad recently, when a large DWCRA show was put up for his benefit.

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