reported for this story by my colleague atmadip on how the credit taps might be opening up again for the mfis. which is good for them. coz the last few months have seen mfi loan portfolios shrink as bank lending dried up.
At Chennai-headquartered Equitas, the asset base is down from 950 crore to about 660 crore since March this year. Or take Ujjivan Microfinance in the east. Its loan portfolio has fallen from 620 crore to 590 crore during the same period. Satin Microfinance, which lends in the north, has seen its loan book reduce from 230 crore to 195 crore, so far this financial year. “We are seeing that portfolio of most MFIs has shrunk substantially in the last one year,” says Alok Misra, CEO of M-Cril, which rates the portfolios of MFIs.
Your question was on how to revive PACs. We have to make them thrift-oriented where every member must save x rupees every month instead of waiting for banks to refinance or for Nabard to step in. That may continue but that cannot be a long-term plan. The long-term plan has to be your own funding. When you have thrift in an organisation, not only do you have a stronger co-op, but wealth retention also takes place at the local level. The profits of that enterprise stay at the local level. Your own savings stay with you. They get invested locally. Plus the profits from the entire enterprise also stay locally — the profits of any third party leave the area.
And the fact that a large number of people have access to credit on a regular basis means there is purchasing power in the hands of a large number of people at the large, contiguous area year after year. You automatically have a large, domestic, service sector emerging which is sustainable because it is not falsely supported from outside. And almost everywhere we see, we see liquor, some entertainment, flour mill, tea shops, workshops, mason, and transport coming in first into the village. And wherever you have good co-ops, sooner or later, you see the housing going up in the area.
And that is a story by itself. It has not been reported anywhere so far. But, my goodness, look what we can do. Instead of going on crying that agriculture cannot support so many people.
I uploaded the complete transcript of my interview with Shashi Rajagopalan, she of the co-operatives fame, to the et website yesterday. Take a look.
economist and iit delhi professor reetika khera is out with a new, edited volume on the first six years of nrega. and given that i am interested in figuring the myriad ways in which india — politicians, state governments, the centre, rich and poor farmers, babus, what have you — is responding to nrega, i mailed her a bunch of questions.
for instance, half the country says nrega is responsible for wage inflation. votaries of nrega say it has empowered the poor. and then, you look at the stats and realise that nrega is nowhere near offering the 100 days of work per household that it guarentees. in 2009-10, for instance, it offered about 50 days. how can 50 days of employment in a year foster empowerment, engender wage inflation?
here is what khera had to say:
You say that 53 days of NREGA employment is too little. In a sense, I agree because I suspect that the actual demand is much higher. On the other hand, 53 days of employment – in one’s own village, at the minimum wage – means something for a poor family. In Bihar in 2008, labourers who were getting 10-20 days of NREGA employment told us that it had made a big difference in their lives. You may wonder how so little can matter so much. That’s because the alternatives for NREGA workers are very unattractive. For instance, migrating to work in brick kilns, or as agricultural labour, often to another state, without proper shelter for your family, captive in the hands of the “thekedar” who takes you there for 2-3 months at a stretch. On the other hand, if 10-20 days of work at Rs 100 per day is available locally, labourers can combine it with work on their own lands or even as poorly paid agricultural labourers locally and stay with their families.
the rest of the interview here.
With the Finance Ministry completing its draft Microfinance Institutions (Development and Regulation) Bill, another large piece of the puzzle on how to regulate Microfinance Institutions has fallen into place.
It has been a tough puzzle to crack. In the beginning of last year, when complaints about women being pushed into debt traps were gathering pace, the RBI and the FinMin were flummoxed by the diverse array of microfinance providers – NBFC-MFIs, co-operatives, non-profits, trusts – all answering to different regulations. The business itself, built around multiple, small transactions in farflung areas, made it hard to verify claims about collection methods and interest rates.
Today, looking at the draft Bill, it is evident that the FinMin has managed to find a way out of some of these perplexities.
needless to say, the bill is not perfect. but, then again, bills rarely can be in a rambunctious democracy given the need to accommodate diverse viewpoints. further, it has just been opened for comments. so, now to see how it evolves from here on. for now, the main thing is, a regulatory regime for the MFIs is gradually taking shape. the journey so far, here, here and here.
the draft microfinance bill is up on the finmin website for comments. a look at what it says.