In an article entitled ‘Debunking Myths About The Poor And Financial Services’ in the Wall Street Journal [1], Mr Suyash Rai, a Senior Manager with IFMR Trust [2], and Ms Sona Varma, Senior Advisor with IFMR Trust, attempt to address what they perceive to be ‘a number of popularly held misconceptions about role of finance in the lives of the poor’. IFMR Trust is a private trust with the mission of ensuring complete access to financial services for individuals and enterprises in India. It does not supply data to the MIX Market portal, an online database that houses financial and other information on MFIs around the world [11].
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MICROCAPITAL.ORG STORY: Not Just Microfinance for Rural Borrowers But Market Literacy: Observations From India In The Wall Street Journal
A recent report on the Wall Street Journal entitled ‘Market Literacy: A Key to Unleashing Rural Consumption and Entrepreneurship’ [1] by Professor Madhu Viswanathan, a Professor at the Department of Business Administration, College of Business, University of Illinois, and Mr Srinivas Sridharan, an Assistant Professor at the Richard Ivey School of Business, University of Western Ontario, Canada, observes that ‘marketplace literacy’ is a crucial tool that can be employed to help the rural poor. In addition to facilitating access to markets and the provision of microcredit facilities, which both authors acknowledged were important, market literacy is stated to be a useful technique that will help the poor ‘overcome the debilitating effects of low literacy and rigid social hierarchies’. The report goes on to explain what constitutes ‘market literacy’ and how it can be used in conjunction with microfinance to help the rural poor ‘confidently pursue economic progress’.
MICROFINANCE EVENT: Credit Risk Assessment Based Appraisal of Project Finance – Working Capital & Entrepreneur Assessment, presented by Entrepreneurship Development Institution of India, October 5-10, 2009 at Ahmedabad, India
Credit Risk Assessment Based Appraisal of Project Finance – Working Capital & Entrepreneur Assessment, presented by Entrepreneurship Development Institution of India, October 5-10, 2009 at Ahmedabad, India
October 5-10, 2009 at Ahmedabad, India
MICROCAPITAL.ORG STORY: CGAP Blogger Analyses Ongoing Problem Of Poor Repayment And Multiple Lending By Microfinance Institutions In Indian State Of Karnataka
In a CGAP blog entitled ‘Multiple borrowing or multiple lending – who is to blame for debt fatigue?’ [1] Mr N Srinivasan explores the microloan repayment problem that has affected some districts in the Indian state of Karnataka. The issue has been covered in a previous article on the Wall Street Journal, which became of the subject of a recent Microcapital.Org Story [2].
MICROCAPITAL STORY: Indian Public Sector Banks may see an Increase in Non-Performing Assets (NPAs) from Microfinance Loans
Indian public sector banks (PSBs) are expecting a rise in stressed accounts (accounts with delays in repayments of principal and/or interest) this year, according to a press release on The Hindu Business Line, an Indian Business daily. These stressed assets are reportedly arising mainly due to refinancing extended to self-help groups (SHG) and microfinance institutions (MFIs) which in turn had primarily extended credit to rural areas. The deficit in monsoon in several parts of the country this year resulting in poor yields for the drought-hit farm sector has been indicated as one factor largely contributing to these stressed assets. An associated reason cited for the NPAs is that some loans were taken for meeting lifestyle expenditure in rural areas, even where the loans are availed for capital expenditure and for setting up trade units. Elaborating on these factors, Mr. Collin Timms, Chairman of the Guardian Souharda Sahakari Bank, an MFI in India, says, ‘the direct impact of drought is the temporary migration of population away from the affected areas. The migration creates a disruption in loan payments’.
NEWS WIRE: India: Mobile Handset Maker Nokia Rolling Out Microfinance Scheme to Sell More Phones
Source: Thaindian News.
NEWS WIRE: India: Reserve Bank Working Group Sees Major Role for Branchless “Business Correspondent” Model
Source: Financial Express.
MICROCAPITAL STORY: Reserve Bank of India (RBI) Deputy Governor States that nearly 50 percent of Farmer Households in India Still Have No Access to Credit; Calls for More Measures to Extend Financial Services in the Country
Nearly half of farmer households in India do not have access to credit either from the banks or other non-banking sources, said the Reserve Bank of India deputy governor Dr. K.C.Chakrabarty, speaking at a conference held recently in Chennai, India and focused on the theme ‘Banking: Key Driver for Inclusive Growth’. In his address, Dr. Chakrabarty pointed out that as per figures published by the National Sample Survey Organization (NSSO) in 2008, 45.9 million farmer households out of a total of 89.3 million households do not have access to credit either from the institutional or non-institutional sources and that as of NSSO’s 2007 figures, a single branch caters to the banking needs of a population of about 16,000 [2]. He also pointed out that for every 100 persons, there are only 17 credit accounts and 54 saving accounts with all institutions put together. Commenting on the sources of loans, Dr. Chakrabarty added that of the people having annual income less than Rs.50,000 (USD 1100), only 28.3 percent had bank accounts, with just 13 per cent availing loans from the banks and 53 per cent people still taking loans from the institutional and non-institutional sources only for emergency purposes. He pressed that the above facts underscore the ‘urgent need’ for extending the banking and financial services to every part of the country for achieving the objective of inclusive growth and that the recent focus of the RBI has been on providing access to affordable banking services to every person.
NEWS WIRE: India: Microfinance Institution Grama Vidiyal to Raise $21m in Non-convertible Debentures
Source: Business Standard.
MICROCAPITAL.ORG STORY: CEO of Aavishkaar India Micro Venture Capital Fund Vineet Rai Expects Merger And Consolidation Of Indian Microfinance Institutions To Increase
The CEO of Mumbai-based Aavishkaar India Micro Venture Capital Fund (Aavishkaar) [1], Mr Vineet Rai, was recently quoted as stating that “consolidation would become necessary for MFIs which are large in size while those smaller MFIs work at the grass roots level and hold the key to engage the borrowers. Here, the big MFIs would prefer to take over the district and semi-urban MFIs to get access.” [2] Aavishkaar was established on 22 May 2002 and aims to support rural and semi-urban entrepreneurs in India by through appropriate financial investment and by providing management support, professional expertise and other resources. According to information on its website, Aavishkaar looks for start-ups and functioning enterprises that impact the average rural or semi-urban Indian and offers financial solutions to enterprises that meets its investment criteria. The idea is for Aaviskaar to help these enterprises become self-sustaining or to be in a position to obtain funding from larger institutions.
MICROCAPITAL.ORG STORY: Basix Chairman Vijay Mahajan Advocates The Use Of Interest-Free Microfinance And Islamic Finance Techniques To Help Muslim Clients in Small Communities In India
According to a report entitled ‘Islamic way of microcredit the best way to help the poor: Basix Chief’ [1] which is available on the Two Circles online information portal [2], the chairman of the Indian MFI, Basix [3], Mr Vijay Mahajan, was stated to have strongly advocated the use of interest free microcredit or equity financing as an appropriate way of enabling the poor in India gain financial independence. Speaking at the inaugural session of an orientation and training camp on interest free micro-financing in Hyderabad, Mr Mahajan was quoted as stating that financing techniques where the investor and the microentrepreneur share both the loss and profit or ‘micro equity finance’ is particularly suitable for poor people although he did caution that it will work most effectively in small communities where people know and trust each other and where the Islamic concept of ‘Iman’ or honesty can thrive.
MICROCAPITAL STORY: Indian Venture Capital/ Private Equity Funds Turn to Investing in Microfinance Institutions in India
Venture Capital/ Private Equity funds in India are now looking at investments in Indian microfinance institutions (MFIs), reports The Times of India, an Indian daily owned by The Times Group [1]. The release quotes undisclosed industry observers as predicting that around INR 1000 crore (approx USD 200 million) will be invested by VC/ PE funds in the Indian microfinance space in 2009 alone. Presence of a good management structure coupled with the business scalability demonstrated by several MFIs has been indicated as some of the ‘essential elements’ favoring VC/ PE funding [1]. In addition, the social angle to the business, scope for high growth and opportunity for exit for investors are also projected as factors favorable to potential investors [1].
MICROCAPITAL EVENT: Microfinance India Summit 2009, October 26-28, 2009 in New Delhi, India, Organized by ACCESS Development Services
Event Name: Microfinance India Summit 2009
Event Date: October 26-28, 2009
Event Location: New Delhi, India, TAJ Palace Hotel
See Our Comprehensive Event Calendar Here: http://microfinanceassociation.ning.com/events
MICROCAPITAL STORY: SME Rating Agency of India Limited (SMERA) Launches Ratings for Microfinance Institutions
SME Rating Agency of India Limited (SMERA), a joint initiative of the Small Industries Development Bank of India, Dun & Bradstreet Inc., and several public and private sector banks, has launched a rating service for microfinance institutions (MFIs). SMERA-MFI Rating is an independent agency that will assess the financial and social performance of MFIs in India.
MICROCAPITAL STORY: India Appears Ready to Finally Pass New Microfinance Bill
The Council of Ministers of the present Indian government will approve the 2009 Micro Financial Sector (Development and Regulation) Bill shortly, according to a press release on BusinessStandard.com, the online business news portal owned by Business Standard Ltd (BSL). As per the press release, the Indian Finance Ministry headed by Mr. Pranab Mukherjee has prepared the note for the long pending Microfinance Bill to be cleared by the members of the Indian Cabinet. The India Microfinance Bill was originally tabled in March 2007 in the elected lower house of the Indian Parliament – also called the Lok Sabha – following which it was referred to the Standing Committee on Finance for further examination. However, with the recent concluded elections and the formation of the next Lok Sabha in India, the old bill lapsed with the dissolution of Parliament and hence the need for the new Bill. MicroCapital had previously reported on the introduction of the old India Microfinance Bill; more information is available in this MicroCapital story.
MICROCAPITAL STORY: Indian Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) Likely to Extend Credit Guarantee
The Indian government is considering increasing its credit guarantee scheme for micro and small enterprises (MSE) in the upcoming 2009-2010 budget through its Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE). The existing guarantee for member lending institutions of this scheme does not cover bank loans to MSEs that are secured by collateral. A finance ministry source claims that the Reserve Bank of India (RBI) has put forward this proposal and is working on it with the ministry.
MICROCAPITAL STORY: Over-Indebtedness And Borrower Delinquency In The Indian State Of Karnataka – A Blogger’s Observations
In a recent entry posted by Mr. Siddharta Chowdri, ACCION International Country Manager for India, on David Roodman’s Microfinance Open Book Blog, it was pointed out that borrower delinquency has become a problem faced by all MFIs in the Indian state of Karnataka. According to the Mr. Chowdri, microfinance clients in the state are borrowing from as many as 6 MFIs and many local money lenders. Many existing MFI’s in the area do not have the systems to track and monitor how much debt their clients are incurring as a result of loans from other MFIs. A good number of clients borrow excessively and exceed their capacity to repay their multiple loans on a timely basis. As a consequence, some of these clients turn to local leaders with complaints about MFIs and their inability to repay their debts. To add to the problem, a number of local leaders have instructed certain MFIs to cease operations and have informed borrowers via the local media and through word of mouth that they are being exploited. There is some suggestion that the actions of some local leaders in this regard may be politically motivated.
MICROCAPITAL STORY: Fund-raising Continues In India – Kerala’s ESAF Microfinance And Investments Raises $2.5 Million Through Sale Of Minority Stake To Opportunity International Australia’s Subsidiary, Dia Vikas Capital
It was recently reported by Ruchika Sharma in VC Circle, a specialist South Asian journal on venture capital, that a South India based MFI, ESAF Microfinance and Investments (EMFIL) has raised Rupees 12 crore (approximately USD 2.5 million). According to the MIX Market portal, a database which provides financial and other information on MFIs across the globe, EMFIL was established in 1992 and is a regulated non-bank financial institution which is modeled along the lines of Grameen Bank. It is stated in EMFIL’s profile on the MIX Market that the MFI’s total assets as at 31 March 2008 is USD 21, 838,532 and it has active 145,712 borrowers. EMFIL’s total equity is reported to be USD 1,169,903 and it has a profit margin of 3.03%. Its return on assets is said to be 0.71 percent and return on equity is 16.74 percent. The services offered by EMFIL include microcredit, microinsurance, funds transfers and micro-energy loans. Kerala-based EMFIL raised the amount by selling 20 percent of its stake to Dia Vikas Capital Private Limited, a 100% subsidiary of Opportunity International Australia. No further information about the transaction is currently available in the public domain.