State of Microfinance in J&K - KashmirCorps

INTRODUCTION
The Beginnings of Microcredit
The origins of microcredit go back centuries
in South Asia. Usually aligned along caste
and ethnic lines, and prominent among the
trader and merchant communities
surrounding major trading hubs , money
lenders were known by various names –
shroff, seth and sahukars – but performed
the same function 1 . They were in the
business of lending money to vendors of the
village, for small durations of three to six
months at exorbitant rates of interest 2 .
According to a Forbes Survey, 7 of the top
50 microfinancing firms in the world are
incorporated in India. Bandhan, a groupbased
microfinance operation that began in
West Bengal in 2002 secured the 2nd place
in this list 4 . While some estimates indicate
that microcredit in South Asia has truly
taken off, some believe that it is just the tip
of the iceberg – and that we are witnessing
the beginnings of a vastly unexplored
pyramid.
A vastly unorganized sector, microcredit in
rural South Asia has flourished due to lack
of adequate financial services. For example,
The Reserve Bank of India’s attempt to bring
money-lenders under the
purview of the government
and enforce stricter
regulations on this organic
industry has not yielded
much success. The Money
Lender’s Act, which is
supposed to be the doctrine
for all money-lenders, is
rarely followed or taken
seriously. Further, the
unitary structure of
governance and the
traditional nature of rural
societies of most South Asian nations has
rendered the enforcement capabilities of this
legislation ineffective 3 .
In India, institutional microcredit has taken
off since the IMF-driven reforms of the early
1990s. Some of the world’s largest
microfinancing firms are now offering
services in this country.
Value of Findings
“If we stop thinking of the poor
as victims or as a burden and
start recognizing them as
resilient and creative
entrepreneurs and value
conscious consumers, a whole
new world of opportunity will
open up.”
Dr. C.K. Prahalad. Distinguished
management expert at the University of
Michigan and author of The Fortune at the
Bottom of the Pyramid: Eradicating Poverty
Through Profits
In the politically unstable Kashmir Valley,
microcredit has had a short history with few
investors. The large
microfinance firms
currently operating across
South Asia have yet to
enter the Kashmiri market.
In addition, limited
research has been done
on the range of
organizations currently
employing microcredit in
this area. Recognizing
this, KashmirCorps has
conducted a basic,
ground-level survey of
microcredit organizations operating within
the Kashmir Valley – performing an analysis
of current operations, challenges, and the
potential for future growth. Evaluating
microcredit at both the institutional and
ground-level, this report will serve as a
survey of microcredit within the Kashmir
Valley and hopefully, a baseline to guide
future microcredit endeavors by potential
investors.
1 | http://www.gdrc.org/icm/suppliers/ml.html
2 | Das-Gupta, 1990:9-12
3 | http://www.gdrc.org/icm/suppliers/ml.html
4 | http://www.forbes.com/2007/12/20/microfinance-philanthropy-credit-biz-cz_ms_1220microfinance_table.html