State of the Sector Report 2010 - Microfinance Gateway

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106 MICROFINANCE INDIAin terms of land holding in joint name was very lowin spite of awareness among these women abouttheir rights. 70 per cent of the women studied werein the confines of their homes; with the support oftheir spouses and microfinance they got an opportunityto earn and contribute to their family. Theirincomes, however meagre, have given them confidenceand made them feel worthwhile, though withincreased physical burden. This new found economicindependence does give them a lot of hope. We needhowever to distinguish economic independence fromempowerment. To these women, Microfinance seemsa transformation to economic independence. ForMicrofinance to effectively contribute to women’s empowerment,or facilitate it at some level, the womeninvolved must perceive themselves as being providedchoices, which they never had in the past. Unless anduntil this mindset is present, we are not likely to findempirically that microfinance leads to women’s empowerment.Women’s empowerment seems a nonissueto them, hence an illusion, at least as of now.The point to ponder is whether microfinancehas an ideological position on gender empowermentin the midst of doing business. Some partsof microfinance seem exploitative of the nature ofwomen, especially with regard to recoveries. Financingof single women and unmarried girls isconsidered a risk, even when migration of adultmales is more common. The question that needsan answer is what kind of product and processchanges need to take place to make microfinancemore gender sensitive?Is it the responsibility ofMFIs alone?The initiatives on SPM are targeted at MFIs approachingtheir customers from a responsible andwelfare viewpoint even as they strive to achievetheir business goals. MFIs are expected to have a sociallyrelevant mission, introduce customer friendlyproducts, appropriate processes, invest in customereducation, exercise restraint in pricing and offerservices beyond finance to improve livelihoods andquality of life. MFIs are but a part of the sector thatseeks to reach out to vulnerable customers. Thefunders, donors and government have an equallyimportant role to play if MFIs are to deliver whatis expected of them. A review of the operations ofMFIs on the ground makes it clear that smaller MFIsand Community Owned Microfinance Institutions(COMFI) deliver more social content and are responsibleto their customers. Higher level agencieswith an objective of maximizing social performancewould do well to support these institutions that arealready well engaged in appropriate practices. Butsmall institutions and COMFIs face extraordinarydifficulties in accessing mainstream funds. Theyare increasingly forced to change form to becomeNBFCs. It is amply evident that an entity becomingNBFC loses its original DNA. Regardless of howeverhard NBFCs try, investor control and shareholdervalue considerations would limit their social performancefocus. The contrarian signals that emanatefrom banks and socially minded investors that pushsocially committed MFIs first to choose forms thatare not natural social entities and then to demandof such institutions that they perform socially aredifficult to comprehend. Enabling environmentfor smaller institutions and COMFIs to get accessto bulk funds, equity and capacity building supportwill bolster SPM in microfinance as much as allother ongoing effort addressed at commercial MFIs.In not providing a good environment to smallerMFIs and those in non-profit forms, the funders donot practice what they preach. In respect of priceof loans, training of staff on SPM, improved loanproducts and practices, funders should also lead theway. Good practices emerge from good examples.Funders and donors should introduce changes inthe manner they deal with the MFIs and then demandof MFIs that they behave similarly towardstheir customers.In sum, the bottom of the pyramid customers arenot only vulnerable but also lack the skills and resourcesto negotiate markets. Despite all attempts atliteracy and education, they will find it hard to acquirethe kind of competence required to contractloans and savings with financial institutions thatcome with highly advanced skills. It is incumbenton these professional institutions to deliver the bestof services on conditions favourable to the customerwithout being asked either by the customer or bythe external institutions. Responsible finance hasmeaning only when these acts that are in the customers’interest are performed voluntarily withoutbeing asked. If this has to be externally stipulated,enforced and monitored on a long term, then themeaning of responsible finance is lost especiallywhen the institutional mandate stipulates that theydeal exclusively with vulnerable people for theirbetterment.Notes1. Microfinance Institutions Network is an industryassociation of NBFCs in Microfinance, set up lastyear, currently having 39 members.2. Sadhan is a network of MFIs, MFOs and other institutionsworking in microfinance sector. It had 230members —financial and non-financial entities.
Social performance, transparency and responsible finance 1073. Alok Prasad, CEO MFIN.4. ‘Access to Finance in Andhra Pradesh’, CMF-IFMRfor CMR-BIRD funded by NABARD.5. ‘Access to finance in Andhra Pradesh, 2010’, CMF-IFMR for CMR-BIRD funded by NABARD.6. Microfinance Transparency is a non-profit companyregistered in the USA, with a mandate to promotetransparency in pricing across the world. It has alreadypublished transparent prices for four countriesand is actively working with 20 more countries(including India) for publishing transparent pricesin public domain.7. ‘Microfinance Synergies and Trade-offs: Social versusFinancial Performance Outcomes in 2008’, AdrianGonzalez, MIX Data Brief no 7.8. Popular MIS software from the Grameen stable.9. Social Performance Task Force (SPTF) is an internationalcoalition of institutions engaged in promotingand facilitating of social performance content inmicrofinance programmes across the world.10. ‘Microfinance Synergies and Trade-offs: Social versusFinancial Performance Outcomes in 2008’, AdrianGonzalez, MIX Data Brief no 7.11. Joshua Wan, intern in CMF-IFMR guided by JustinOliver, Shreyas Gopinath and the author of thisreport carried out the survey of respondents andprovided the data on social and financial orientationscores, providing the basis for the further analysiscontained in the report.12. The assumptions were that high return-on-assetsand high yields are not socially aligned as theycause distress to the customer. Though financialsector return-on-assets hovers around 1 per cent,looking to the peculiarities of the Microfinancesector return-on-assets of 4 per cent was deemedthe threshold for an institution to be consideredas socially aligned. Return-on-assets in excess of 4,therefore, was not considered ‘social’ for this scoring.Similarly, yield in excess of 30 per cent wasnot deemed ‘social’. Disclosure of interest rates toborrowers was deemed social. If MFIs had decliningyields when their costs declined, the action wasdeemed social. Where yields increased despite a decreasein operating costs or where cost savings werenot reflected in declining yields, the same was notdeemed ‘social’.13. ‘The Illusion of Women Empowerment in Microfinance:A case study’, Lakshmi Kumar, Faculty,IFMR.
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Microfinance India
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ForewordAfter coping with the uncer
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ForewordxvI’m happy that the 2010
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xviiiMICROFINANCE INDIASadhan’s c
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2 MICROFINANCE INDIARBI is focused
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4 MICROFINANCE INDIAcent in 2009. 1
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6 MICROFINANCE INDIAMFIs did not se
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8 MICROFINANCE INDIA(DFID) had prio
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Overview—the juggernaut decelerat
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14 MICROFINANCE INDIASavings Perfor
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16 MICROFINANCE INDIAamply clear th
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18 MICROFINANCE INDIAyears have a l
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20 MICROFINANCE INDIAThe study whil
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22 MICROFINANCE INDIAper cent peopl
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24 MICROFINANCE INDIAState andname
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26 MICROFINANCE INDIAinnovation tha
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28 MICROFINANCE INDIAANNEX 2.2Micro
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30 MICROFINANCE INDIARegion/StateF
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32 MICROFINANCE INDIAMFIs in the mi
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34 MICROFINANCE INDIAreturn-on-asse
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36 MICROFINANCE INDIAneeds introspe
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38 MICROFINANCE INDIACompetition an
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40 MICROFINANCE INDIAIt looks unfai
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42 MICROFINANCE INDIAwas a commenda
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44 MICROFINANCE INDIAterms of ideas
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46 MICROFINANCE INDIAfast growth of
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48 MICROFINANCE INDIASecond wave of
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50 MICROFINANCE INDIABut to make MF
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52 MICROFINANCE INDIA11. In Chapter
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54 MICROFINANCE INDIAflow of funds
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Page 89 and 90: Savings, investmentsand pensionMicr
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Page 101 and 102: Policy environmentand regulationThe
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Page 107 and 108: Technology in microfinanceMicrofina
Page 109 and 110: Technology in microfinance 91Other
Page 111 and 112: Technology in microfinance 93100%90
Page 113 and 114: Social performance,transparency and
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Page 136 and 137: 118 MICROFINANCE INDIASHG Sahayog N
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Page 149 and 150: AppendixTable A.1 Fact sheet on cov
Page 151 and 152: Appendix 133Name of the bankCommerc
Page 153 and 154: Appendix 135mobilization by SHGs an
Page 155 and 156: BibliographyThe Union Budget 2010-1
Page 157: Bibliography 139‘How India Earns,
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