03 August, 2021

Small Change

High rates, extortionary practices are the reality. But the big fish are moving into microfinance.

R. Prasad
Small Change
The future, said management scientist C.K. Prahlad, lies with those that see the poor as their customer. And microfinance institutions (MFIS) have been the biggest beneficiary of this vision. The Nobel Peace award to Mohammed Yunus and his Grameen Bank, the first successful MFI in the world, lends strength to such efforts in India, which is attracting huge amounts through venture capital funding, and is now seen as the only hope for the 97 per cent of the poor, who have zero access to credit.

Of late, the sector has come under heavy flak in some states for exorbitant rates and extortionary recovery practices. India is probably the largest market for microfinance services, attracting unprecedented investors like technopreneur Vinod Khosla. Growth has been a scorching 20 per cent plus, with some outfits growing even at 150-200 per cent. Some 2.23 million self-help groups (SHGs) are now linked to the formal banking sector, compared to 1.16 million in March 2005, says NABARD. Nearly 78 per cent of the members are rural, 95 per cent among them...

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