Financial Inclusion Conference - Sa-Dhan

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S E S S I O N - 1F i n a n c i a l I n c l u s i o n C o n f e r e n c e - 2 0 1 2“The First Mile Walk into the Financial System”Microfinance and Inclusive Growth:What are the Measures of Success or Learning?Session-1HIGHLIGHTS• The success of microfinance depends largely on the success of their clients• At the very basic level, MFIs need to ensure that their operations do not result in anyundesirable outcome for their clientsPANEL OF SPEAKERS:• Mr Mathew Titus, Executive Director, Sa-Dhan• Mr Jayanta Kumar Sinha, CGM–Rural Business, State Bank of India• Dr. Ramesh Bellamkonda, Project Director, BSS Microfinance Pvt. Ltd• Mr Larry Reed, Director, Microcredit Summit Campaign• Dr Hema Bansal, India Manager – SMART Campaign• Mr T K Arun, Editor, Times OpinionOpening the session Mr Mathew Titus stated that the sector has been through atime when its achievements have been put to question. There is a need to look at themeasures of its success afresh.Mr Jayanta Sinha, in his presentation, highlighted the fact that SBI has utilizedseveral channels to take forward its financial inclusion initiatives. So far, SBI hasfinanced over 1 crore farmers of which greater than 60% are small and marginalfarmers. SBI has been reaching out to the remote parts of the country through itsbranch network, RRBs, MFIs, SHGs as well as Business Correspondents across thecountry. It provides a variety of financial services to customers in remote and ruralareas. In order to provide skills training to the underprivileged SBI has alsopromoted 107 Rural Self Employment Training Institutes (RSETIs) spread overthe country. SBI has trained over 1 lakh youth through these RSETIs and helpthem access employment opportunities. For providing financial literacy, it haspromoted 87 Financial Literacy and Counselling Centres (FLCCs). Recounting thesuccesses of SBI, Mr Sinha also highlighted the following achievements:1. Credit linkage of over 20 lakh SHGs leading to social and economicempowerment especially of women and the downtrodden2. Increased financial inclusion through the BC channel which has helped in theunderprivileged access banking and remittance services on the one hand,eliminated middle-men in government benefit transfers on the other.Mr Larry Reed, emphasized the need to move beyond numbers (such as number of6
F i n a n c i a l I n c l u s i o n C o n f e r e n c e - 2 0 1 2“The First Mile Walk into the Financial System”accounts opened) to outcomes such as reduction in severe poverty to measure thesuccess of microfinance. He illustrated the example of Brazil where thegovernment has encouraged financial institutions to provide productive creditbased on sound business and marketing plans, which the financial institutionshelped develop, to poor farmers in rural areas. In order to make the investmentsecure for financial institutions the government bought the agriculture-produce.The government also used its social security programme to guarantee a minimumlevel of income for two years to those who had been receiving government supportearlier, but decided to join this credit programme, in order to encourage the poorto take to productive livelihood activities. This has helped reduce severe povertyfrom 22% to 7% between 1990 and the present time. Mr Reed concluded, urgingMFIs to measure their success in terms of success of their clients.S E S S I O N - 1“Your success is measured by the success of your clients and if you are rigorous inmeasuring that success, you can know that your clients are better off, so that you knowthat you provide the right products” – Larry Reed, Director Micro Credit SummitCampaignDr Hema Bansal, said that not much attention is paid to understand the clientrequirements. She said that there has been a focus on client protection from theregulator, Self Regulatory Organizations such as Sa-Dhan and Social Investors. Shefurther said that client protection is about doing no harm to clients which is focusedon the following seven principles:1. Appropriate product design2. Prevention of over-indebtedness3. Transparency4. Responsible pricing5. Fair and respectful treatment of clients6. Privacy of client data7. Mechanisms for complaint resolutionDr Ramesh Bellamkonda, said that while poverty alleviation is the key objective, inthe narrower context success would mean that every poor household has access totimely credit as per its needs in a cost effective and financially sustainable manner.Enumerating challenges he said that appropriate lending has to be a collaborativeeffort between honest sincere lenders and honest sincere borrowers. He said thatwhile lenders should be responsible not to over-lend, they should not be solelyblamed for problems as there are many constraints which are beyond their controlincluding socio-cultural, political and law and order matters.Mr T K Arun mentioned that the media could be more constructive and informedin highlighting the role that microfinance plays. He also said that as things change,7
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