From The Economic Times
HYDERABAD: India’s microfinance model is not sustainable due to its overdependence on the government, the huge subsidy given by the state and the lack of a regulatory framework to check the exploitation of the poor, sectoral practitioners from Bangladesh say.
They are of the opinion that the Bangladeshi model is more sustainable as it is run professionally and is yet pro-poor, with civil society and NGOs playing an active role at the grassroots level and the government acting only as a facilitator.
The experts said while the Indian model is limited to providing credit, Bangladesh has NGOs and microfinance institutions (MFIs) working in the areas of education, health and gender.
This comparison is despite the whopping 27 per cent interest charged in Bangladesh against a meagre three per cent in Indian states like Andhra Pradesh, which has the highest number of people – 10 million – covered under micro credit.
An international summit on microfinance and inclusive development held here last week provided an opportunity to delegates from various countries to share their experiences and gain first-hand knowledge of the working of women’s self-help groups (SHGs) in Andhra Pradesh.
Talking to IANS, Atiqun Nabi, Asia head of the International Network of Alternative Financial Institutions ( INAFI )), and Humera Islam, executive director of the Shakti Foundation of Bangladesh , voiced their doubts on the sustainability of Indian microfinance.
“Unlike in India, where the state is playing a very important and active role, in Bangladesh it is basically civil society and NGOs who take microfinance to the ground. That is why microfinance in Bangladesh is still pro-poor,” said Atiqun Nabi, who is from Bangladesh.
“What if the government here stops supporting the programme,” asked Nabi, who also saw the danger of the party in power using the SHGs to further its political agenda and the groups suffering with the change of government.
He also pointed out that the microfinance programme in India lays more emphasis on economic development but is not so concerned about issues like women’s empowerment, health and education.
“The whole thing here is government-sponsored. The government is supposed to work at the macro-level, but they are stepping into a domain that is clearly not theirs. The question is how far a government can carry on because it has much more important things to do,” Humera Islam of the Shakti Foundation, one of the largest MFIs in Bangladesh, told IANS.
She pointed out that Bangladesh has brought well-thought of regulations allowing free market institutions like NGOs and private enterprises to operate at the micro-level but protecting the interests of poor by fixing the upper limit of interest.
Justifying the 27 per cent interest rate, she attributed it to the administrative and operational costs and the capital funds the MFIs need to create to take loans from banks.
“These are financial calculations and this has nothing to do with exploitation. You have to have money in the first place to run a project.”
Atiqun Nabi attributed the success of microfinance in Bangladesh to the regulatory framework for MFIs with the condition that they can’t charge beyond a certain per centage.
However, interest didn’t matter to him so long as there was no exploitation and the needs of the borrowers were met in a professional manner. “The borrowers here are used to three per cent interest but what will happen if it is withdrawn? You may have a formative stage of one or two years but ultimately you have to compete with the market rate,” Nabi pointed out.
Humera Islam said that since women in Andhra Pradesh and other states in India were dependent on the government, they are not likely to really become empowered. “If you’re not taking ownership of the process of development, the rate of recovery is bound to be bad and there will be no sense of responsibility,” she said.
She also found that the SHGs comprise women of the same socio-economic status and perhaps do not involve the poorest of the poor.
The micro-credit practitioners feel that the sector in Bangladesh had matured to an extent that even the departure of Noble laureate Muhammed Yunus from Grameen Bank had no impact on the movement.
“This is the beauty of Bangladesh microfinance. Every time there is a big crash, people say it will affect MFIs but what happens at the macro-level makes no difference. We are very supportive of Mohammed Yunus as he is our national leader but the government has done its job,” Islam said.
From Business Standard
Irrespective of what the Reserve Bank of India (RBI) thinks about the role of microfinance institutions (MFIs), the recent actions of the Andhra Pradesh government against these organisations for their alleged excesses in lending to the rural poor, have now assumed a pan-India significance.
Government of India’s National Rural Livelihoods Mission (NRLM) and the International Network of Alternative Financial Institutions (INAFI), India, have joined forces with AP to correct what is termed as the ‘mission drift’ caused by gross commercialisation of microcredit in the last 3-4 years.
The two organisations, along with AP’s Society for Elimination of Rural Poverty (SERP), are organising the fourth Alternative Summit, an international event, here from June 21 to 23. The theme is ‘Microfinance and Inclusive Development’. SERP spearheads the self-help group movement under the state rural development department initiative.
“There is a greater concern across the globe that microfinance programmes have been drifting from the original purpose and moving away from the primary objective of addressing poverty. They are more concerned with sustainability resulting in gross commercialisation…” the state government today said while announcing the details of the summit.
In AP, the MFI operations have come to a standstill with the fate of Rs 6,500-crore microcredit outstandings hanging in balance. The state insists on regulating the MFI activities backed by the special legislation it brought out last year even as RBI thinks there is no need for such a regulation.
Apart from microfinance practitioners from countries such as Bangladesh, Philippines, Afghanistan, Nepal, Sri Lanka, Africa and USA, the event is being attended by senior officials from both the state and the Centre besides the World Bank and the RBI. Union Minister of State for Environment and Forests Jairam Ramesh and chief minister N Kiran Kumar Reddy will inaugurate the event tomorrow.
INAFI chief executive M Kalyanasundaram said no mainstream MFI had been allowed to take part in the event. “The summit is being attended by those NGOs that consider microfinance as a part of their larger objective of addressing poverty,” he said.
About 75 overseas delegates, 130 members representing community groups and 150 representatives from various NGOs are taking part in the event, according to Sunita Laxma Reddy, minister – Self-Help Groups and Women’s Development.
SERP chief executive officer Rajasekhar said the government would soon announce the details of the proposed NBFC being exclusively set up for catering to the microcredit needs of women self-help groups in the state. The NBFC would be launched with a corpus of Rs 300-400 crore contributed by both the Centre and the state government apart from other financial institutions.
The european uinon in partnership with Oxfam Novib and International Network for Alternative Financial Institutions (INAFI) have team up project to foster the linkage between migration and development in Africa.
According to David Foka, president of the federation des Associations Africaines du Grand-Duche luxembourg the project will aimed at achieving financial access for migrants and their families, and to enhance money transfer competition by providing knowledge, technical assistance and building partnership.
M,r foka further statedthat , they would partner with immigrant associations in Europe, Microfinance Institutions (MFI) in Africa and money transfer operators.
Mrs Soukeyna Ndiaye Ba, Executive Director of INAFI, who made this known at a two-day conference on remittances to Africa in Accra on Thursday said the project would train and enable 10 microfinance institutions in 10 sub-Saharan Africa countries to increase their competitive edge in money transfer service and other financial driven instruments.
The conference is on the theme: 93Harnessing the Potentials of Migration for Development: Linking Microfinance Institutions and Immigrant Association.”
She said it would enable the MFIs to build partnerships including a co-development programme with immigrants associations working or residing in European countries.
She said the objective was to improve the capacity of immigrant associations based in 10 European Union countries to actively support the development of their countries of origin and to enable MFI to facilitate their transfer of migrant remittances in a safe and cheaper manner.
Mrs Ba said it is expected that technical assistance programme would be provided for MFIs in 10 Sub-Saharan African countries to enable them perform money transfer worldwide.
“Develop and market remittance based financial products and service and other investment opportunities targeting potential individual migrants would be ensured,” she added.
She said the project would also identify barriers to entry and competition among MFIs, develop financial literacy toolkits, and conduct financial literacy training of trainers for migrant leaders and remittance receivers among other issues.
It would investigate needs and wants of migrant remittance senders and receivers and also organise work conference in Ghana by establishing partnerships between MFIs and money transfer operators.
Mrs Janny Bosscher, Representative of Oxfam, an international NGO said the discussions have revealed that the problems faced by remittance receivers were communication and security in receiving the money. from frank obimpeh crystal hotel tesano Accra.