State of Microfinance in J&K - KashmirCorps

RECOMMENDATIONS
Because microcredit is a relatively new
concept in Kashmir, it may take some time
before best practices are established.
Currently, the first rounds of individuals are
still taking out loans and most SHGs have
existed for less than five years. This mirrors
larger structural issues with microfinance;
being a new concept, even the original
projects have yet to bear tangible results.
Thus, it is difficult to establish how effective
microcredit will be within the next ten years
but based on observation, the researchers
have some recommendations for how
microcredit could become more effective in
the Kashmir Valley.
1. Establishing a Centralized Organization
for the Coordination of Microcredit
Operations
As mentioned earlier, no coordination exists
between the different microcredit
organizations operating within Kashmir.
This results in unsuccessful programs being
repeatedly attempted and best practices
have not been shared to the larger
microfinance community. In addition, job
skill training organizations such as the Craft
Development Institute have not been
included within the training process for loan
recipients. A centralized body that monitors
microcredit operations within the Kashmir
Valley would assist in coordinating various
operations within the region, thereby
achieving efficiency and disseminating
lessons learned.
2. Tracking Microcredit Clients
In order to gauge the effectiveness of any
program, it is necessary to evaluate the
effect it had on the loan recipients pre- and
post-implementation. Financial institutions
should keep track of how these groups are
performing after the loans have been
disbursed. In this manner, financial
institutions can evaluate their microcredit
programs, making adjustments where
necessary to make their programs more
effective.
3. Sustainable Knowledge Transfer
An initiative that seems to have worked
effectively with the JKSWDC involves the
training of just one member of a SHG in a
particular skill and allowing them to pass
this knowledge on to the rest of the SHG.
This is not only cost-effective because only
one person is trained at a time, it also
empowers the women. This ‘train the
trainer’ model is effective for three reasons;
it incentivizes personal development in a
meaningful way, allows SHG members to
earn additional income, and it promotes
self-sustainment of SHGs.
4. Bolstering Islamic Microfinance
The concept of Islamic finance – the idea
that banking should be in line with sharia
law – has achieved popularity in many
countries worldwide. Slowly, Islamic
finance is merging with microfinance to
create Islamic microfinance. The key aspect
of this concept is that loans should not have
any interest. This would greatly benefit
many of the clients, many of whom
complained that high interest rates made the
loan difficult to repay. Islamic microfinance
could be implemented in the Kashmir
Valley given the large Muslim population.
Additional inquiry is needed with regard to
this concept.
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