micro finance : opportunities ahead

8/9/2019 Micro Finance : Opportunities Ahead

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Micro Finance: Opportunities AheadProf S P Garg

Globally, Micro finance has been recognized not only as a mere financial instrument but

a powerful tool for development to address multiple dimensions of common people,

particularly sustainable livelihood. Micro finance brings together communities of theunorganized sector and builds their social capital and networking.

No other development instrument has generated so much enthusiasm and commitment in

the recent past .Through innovation and creativity, microfinance takes care of an entire basket of services: micro savings, micro credit, micro insurance payment and remittance

services, social security, health services and finally the capacity building in long run to

improve the quality of life.

In South Asia, India and Bangladesh have demonstrated various successful micro finance

models that have reached millions of common under privileged people through deepening

engagements and participant’s faith, affirmative action and commitment. The 11 th Five

Year Plan has further stressed on Inclusive Growth and Financial Inclusion.

Who Are Financially Excluded And Whom To Serve :

Financially excluded from Credit ,Savings, Insurance Financial Services and Advice

are basically heterogeneous group of people such as Marginal farmers, Landlesslabourers, Oral lessees, Self employed and Unorganized sector enterprises, Urban slum

dwellers, Migrants, Ethnic minorities and Socially excluded groups, Senior citizens and

Women. Old people and physically challenged people. This is a large section of the

society in rural as well urban area.

It is estimated that there are about 500-600 million unbanked or under banked people inthe country .Let us realize that poor is bankable.

Various approaches have been adopted for micro finance such as : SHG & Bank Linkage

Model ,Business Facilitator & Business Correspondent, MFIs, Involvement of NGOs andCommunity Development Organizations.

The micro finance sector in India has been on a tremendous growth path and this process

continues. India would be the biggest Micro Finance Basket of the World.

Opportunities Ahead and Role of Management Education:

Micro finance sector with its twin objectives of national agenda of inclusive growth

through Financial Inclusion and sustaining growth with quality is to address different

interlinked issues with total integrated support of various stakeholders.

As a Business Opportunity



Some of the challenges which can be converted by management graduates with their

commitment into business opportunities would be : Appropriate and affordable

Technology, reach and coverage, Appropriate and Efficient Delivery Mechanism,developing Sustainable Business models ,Scaling up and replicability of the activities ,

lowering transaction costs, linking with mainstream activities , strong collaboration

among Banks, Technical Service Provider, and finally involvement of all .

Micro credit plus

There is a huge basket of services, such as micro-insurance, health, remittances, social

security etc.along with value propositions to facilitate linkages.

Develop Passion:

Micro Finance friendly approach in totality and to look beyond today is needed. For of this sector ,development, capital, knowledge and opportunity are key inputs to empower

the people.

Eye for Creativity and Innovation

Creativity for product designs, channel configurations, cost cutting and technology usage

and value creation would be important components of strategic planning. And here lies

the role of Management education as a differentiating factor.

ICT as an Enabling Factor:

For cost reduction, scalability and profitability, ICT interventions would enable to servethe masses at their door step. On cost structure the important work will be developing

technology solutions, standardizing data quality and definitions, building client related

bureau and linking it with existing MIS. This would require special attention.

Risk Mitigation

Within the sector, different stakeholders have different roles. Each of these stakeholders

possesses strengths and weaknesses that provide opportunity and threats. The major risksthat are critical for the microfinance sector are management quality, corporate

governance, and inappropriate regulation.

Proper understanding of Financial Products:

Management Education can make to better understand how financial products and

services may be provided cost-effectively, accounting systems, repayment cycles, andwhich programmes work and which do not.

Also Strong fundamental for finance related activities like savings, borrowings,

utilization of amounts, collection of installments, repayment of loans and subsequent borrowings for additional purposes and sharing of profits need to be inculcated.

Respect for Self Regulation and Transparency:



Self regulation along with transparency of operations is important; least it would be

susceptible to huge risk. Management education can further improvise the accounting

standards and improving the code of conduct of micro finance institutions. And enhance public reporting Models like SMART racking (Specific, Measurable ,Achievable,

Realistic, Timely Indicators) to be replicated.

Encourage Financial literacy

To empower the clients, the benefits of all components of micro finance activities programs need to be combined with financial literacy and other educational programs .

Also encourage women empowerment and local leadership.

Develop market linkages

Coordinate with marketing organizations, bodies for sale of the products developed/

produced by the beneficiaries. This would enable to strengthen the repayment culture, besides giving right price to them for their produce.

Evaluation of ongoing programs:While the focus of microfinance in India has been largely on growing outreach, a need isincreasingly being felt to evaluate existing interventions for impact and analyze program

designs rigorously Work in close coordination with Government and Regulators for

effective understanding of Legal and Regulatory Environment .

Create Strong Sustainable Brand :

Showcasing and replicating the impact of Microfinance activities is also equallyimportant for strong branding. Also become a facilitator for encouraging reward and

recognitions for the field staff.

Finally, Focus on Human Resources issues:This sector ,being in its infancy stage calls for a huge human capital at all levels to

address the issues like Recruitment of right staff at different cadres, retention, continuous

training and developing dedicated cadre, compensation, staff incentives schemes, toenhance performance and productivity are required to be addressed suitably. Creation of

a positive mind set amongst staff would be ongoing process. Suitable Training modules

are to be developed. There are huge opportunities for MBAs to join the stream at variouslevels for a rewarding career proposition.

Ultimately, micro finance sector is a business proposition along with socialcommitment. The fragrance of success has already been felt.

…………………..

This article has been published in JIM JAIPUR INSIGHT, VOL 4,NO 1.(January –

March2010).

Author can be approached at: [email protected]

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micro finance : opportunities ahead

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