Growth at a Scorching Pace
From people carrying a sling bag on their shoulders and dressed in a khadi kurta, the microfinance industry has moved upmarket either to suits or FabIndia kurtas. A netbook has replaced the sling bag. In about a decade, microfinance has moved from helping the poor to access finance to an interesting business at the bottom of the pyramid. This paradigm shift happened with the entry of funding, initially from Silicon Valley, and then from the people who funded and fuelled the growth of Silicon Valley.
In Krishna, we suddenly decided that we could afford to reduce interest rates and continue with life as usual. Does that mean that we were charging more? How do we tread the fine line between trying to seek “what the market can pay” price and not appear greedy?
(This story appears in the 21 May, 2010 issue of Forbes India. To visit our Archives, click here.)
I fully endorse the view of Prof Sriram. Time has come for MFIs to introspect and realign themselves with their lofty objectives. There is nothing wrong in good living but care has to be taken about the debt trap being formed around poor people.
on May 28, 2010Sriram is being criticized for his remarks more often than ever after his recent working paper is published. Truth is bitter and not digestible to the aspirants of IPOs and Listings. Reality is these rural illiterate women are manipulated into wanting more and more money as loan. Thereby, these MFIs keep themselves safe when it comes to blame game on who's fault is it for multiple lending/borrowing. Of course, the loan officers are trained to be robots, how else the case loads of our leading MFIs loan officers reach 1200 to 1500? Group meetings of many of these MFIs don't last even 20 minutes. ....I hear 7 from one of the proud loan officer here.
on May 13, 2010Can't agree more! It is good that we have people like Sriram to raise red flags and offer a rational critique. Although there is no empirical research to prove that clients are taken for a ride and subjected to too much debt, it is imperative that MFIs move out of their black box and think beyond group lending machine. We should be grateful for selfless efforts of "good boys" in building and saving the sector though but they should also realize that such backlash will affect their reputation if they continue pampering "bad boys", if any, unconditionally.
on May 8, 2010Excellent and open commentary on the state of competition amongst MFIs in outdoing others at the expense of the poor clients. While i was reading the para on how the credit officers are robots and how a group meeting is completed in 20 minutes time sums up how MFIs are growing fast and pride on how they have scaled up as well as get the 100% repayment without looking at what happens to their clients and the ordeals of overburdened liability of bearing unfaithful clients.
on May 7, 2010