Wednesday, January 5, 2011

Issues and Concerns in Micro Finance in India

I have been working for some time on this topic - Micro Finance in India.  Having worked in Rural Banking for nearly two decades in SBI both at branch level and at Corporate Office in Mumbai, I have had a fairly good idea about the task.  May be this experience in Agricultural / Rural Banking did not yield expected or desired benefits in my career but I had tremendous satisfaction for serving the needy, rural poor in the backward area like Warangal and Medak districts of Telangana in AP.  It was quite an enriching experience.

In recent years the concept of Micro Financing has taken twists and turns in India, even though this concept is very popular world over.  Generally, Dr/Prof Muhammad Yunus is credited with this line of financing as a pioneer in Bangladesh when he founded Grameen Bank.  In fact years before commercial banks in India, in particular SBI entered rural areas to spread banking habits in remote unbanked areas through Lead Bank Scheme, Village Adoption Scheme, Priority Sector Lending, Group Guarantee Scheme, etc etc.

Unfortunately in recent months, MFIs in Andhra Pradesh have experienced difficulties in recovery of loan dues as also suicides being committed by defaulters.  Rate of Interest charged by MFIs is also on the higher side.  SKS has gone ahead with a IPO to mop up funds and expand its operations to about 18 States.   But, Mr Vikram Akula, the founder and SKS encountered several issues.  Media has been extensively covering issues of MFIs on a daily basis.  Several research organisations, academic institutions, financial outfits, etc have been organising seminars and conferences to find solutions.  I am reminded of banking secgtor reforms in early nineties and mushrooming / regulation of NBFCs in the same decade. 

I would be attending a National Level Conference in Mangalore tomorrow being organised by SDM College of Business Management and Bankers' Club.  With a vast amount of literature collected by me over years, I started preparing the paper / presentation.  In fact, I had presented an exhaustive paper on Financial Inclusion and Micro Finance in December 2008 at an International Conference organised by Justice KS Hegde Institute of Management, Nitte.  Let me see how my current paper shapes and will be received.

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