India: ‘Change in Attitude Needed to Make MFIs Profitable’

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Jul 2017
India, July, 11 2017 - Delivering the 8th V. Sitaram Rao Memorial Lecture here on Monday, he said the challenges that needed to be addressed, especially for micro-finance institutions (MFIs) included ushering in an attitudinal change, offering not just micro-credit but make available micro-savings and insurance in the bouquet of offerings by leveraging technology and helping the rural poor become tech-savvy too.

Rural poor need insurance and micro savings products too

Over 160 years after William Frederick Raiffensen and Franz Hermann Schulze-Delitzsch formed the world’s first credit union in Germany and kick started the journey of micro-finance across the world, there are still challenges like limited reach and limited offerings of services like micro-credit, said Vijay Mahahan, Founder and Chairman of the BASIX Group.

Delivering the 8th V. Sitaram Rao Memorial Lecture here on Monday, he said the challenges that needed to be addressed, especially for micro-finance institutions (MFIs) included ushering in an attitudinal change, offering not just micro-credit but make available micro-savings and insurance in the bouquet of offerings by leveraging technology and helping the rural poor become tech-savvy too.

Mr. Sitaram Rao was CEO of SKS Micro-Finance that is now Bharat Financial Inclusion Limited and pioneered micro-finance in his time.

He said not just a digital invasion or touch was needed, but what he described as a ‘Digit-Touch’ by reaching out to offer credit and insurance, while also going to the doorsteps of the rural poor and collect the savings they had, however small the amounts may be.

“The Business Correspondent model that is doing the rounds is good, but it needs to expand,” he said.

Tracing the history of micro-finance across India, he recalled that how the company he founded - Bharatiya Samruddhi Finance Limited (BSFL) was Numero Uno in the year 2001, slipped a notch every year and in 2009 was finally placed at No. 7 or 8 among MFIs in India. “The BSFL is now 0.03% in size from what it was in October, 2010,” he said.

A myth that needed to be dispelled was the assumption that the rural poor only needed credit, he said pointing out that they needed insurance and savings plans. “The poor needed money for food security, education and for their healthcare needs,” he pointed out.

An impact study had revealed only 52% of borrowers reported significant progress in their lives, while 23% replied that their financial position declined and 25% said there was no change in their lives. “This made us do a re-study and we found that the poor were repaying us through money got from other sources,” he said.



Source : The Hindu
 

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