19

Scaling Up in Microfinance - Issues and Challenges

and branch closures (an approach

special programme for promoting

applied in many other countries). The

rural industrialisation. It also

approach has recently been

supported

a

Microventure

replicated in 20 district cooperative

Innovation Fund in favour of rural

banks.

innovators.

b.

At the very early stages of the self-

Role of Donors in Rural Finance in

help group (SHG) movement, SDC

India in general and providing

f a c i l i t a t e d  action  research,

Capital for MFIs in particular

innovation and foreign exposure

focusing on pro-poor banking. SDC

A question that is often asked is what

also made available means to

could be the possible role of a bilateral

promote SHGs, their federations and

donor in a country like India that has a

their linkage to formal banks. A

large network of financial institutions and

continuous dialogue with NABARD,

a pool of competent human resources.

exposure to connect with field

a.  The key role of SDC has been that of

realities, and capacity building of

a facilitator for the development of

stakeholders were some of the key

financial systems catering to the

features this programme supported.

needs of poor households as well as

From 500 pilot SHGs in the early 1990s,

of micro- and small enterprises. We

the movement grew to the world's

believe that it is important to give

largest microfinance programme

"voice" to the aspirations of the

with over one million groups linked

poor. To this extent, SDC sees its role

with about 560 banks reaching 17

as a facilitator that promotes active

million poor people, mainly women.

links between the formal and the

c.

In BASIX, SDC was, together with the

informal sector.

p r o m o t e r s / o w n e r s of this Non-

b.  SDC is convinced that flexibility,

Banking Financial Institution (NBFC),

i n n o v a t i o n s , ideas and clear

one of the two first investors. This

orientations provide the inspiration

enabled BASIX to start its operations,

and the required energy in all

build a healthy portfolio and attract

developmental efforts. Supporting

other investors including financial

p r o - p o o r innovations, action-

institutions from India and abroad.

research and taking risks have

BASIX has been an important mover

therefore been an important feature

of innovations (e.g. on new

of SDC's programmes in India. SDC's

p r o d u c t s and service delivery

experience has been that formal

models, the start-up of a new type

institutions tend to exhibit risk-

of Local Area Bank (LAB) and the

avoiding behaviour. We think that

promotion

of

livelihood

it is necessary to promote and

opportunities  going  beyond

nurture innovations even if there is

financial services). BASIX, along with

the possibility of some failures.

other

Indian

stakeholders,

c.  Another role for donors like SDC is to

conceptualised and formed Sa-

facilitate and promote conditions

Dhan, a national network to build

(and not to compete or substitute)

and to strengthen the rural finance

that might enable the national

s e c t o r  in  general  and  the

institutions to mainstream pilot

microfinance

movement

in

experiments and leverage national

particular.

resources.

Two

examples

d.

SDC supported Sa-Dhan in the first

substantiate  this  point.  SDC

Promoting quality

two years of its functioning when the

supported BASIX in the initial stage

does not mean

association was launched as an

of its launch. However, BASIX was

building islands

apex network to promote policy

able to leverage in multiple times

of excellence.

dialogue, build capacities of the

equity and loan resources from a

What we mean by

member microfinance institutions

large numbers of national and

quality is to

(MFIs)  and  reach  common

international institutions thereby

constantly search

standards.

diversifying its stakeholdership.

for 'effectiveness'

e.

Promising microfinance and micro-

Similarly, NABARD after the initial

in all actions

enterprise programmes have

success in the pilot project of linkage

rather than just

emerged during a long-term

of SHGs with banks went ahead in

narrowly focus on

collaboration with the Small

replication that has resulted in

reaching targets

Industries Development Bank of

formation of over one million-plus

with efficiency as

India (SIDBI). SIDBI promoted a

SHGs all over the country. While SDC

the sole driving

separate department, the SIDBI

was ready to support the initial

force

Foundation for Micro Credit (SFMC)

experiment, it was also happy to

and designed and implemented a