27

Scaling Up in Microfinance - Issues and Challenges

Concluding Session

The Way Forward

Chairing the fifth Technical Session on

`The Way Forward', Ela R Bhatt presented

the Finance Minister P Chidambaram the

charter of demands that would improve

the accessibility of financial services to

the poor. These were:

1.  Recognition of the role of mF in the

system by providing for an mF NBFC,

Vikas Nidhi

2.  Establishment of a Microfinance

Development and Regulatory

Authority

3.  Facilitating environment to have

easier access to resources through

amendments in tax rules and foreign

investment norms.

promoted through proper legislative

support, he remarked. As far as interest

T h e sessions had presentations by

rates are concerned, Prof Vyas argued

Nachiket Mor, Vinod Rai, Prof V S Vyas

that, if the interest rates charged in the

and  finally,  the  address  by  P

mF sector were higher than the cost of

Chidambaram, Hon'ble Minister for

c a p i t a l and charge on services

Finance, GoI. In his presentation, Mor

rendered, then the issue ought to be

drew the attention of the house to the

seriously looked into.

increasing interest of the private sector

banks in the area of mF. He articulated

Clearly reflective of the pertinence of the

the importance of the partnership model

sector in policymaking, was the

and securitisation deals, furthered by

encouraging  presence  of

P

ICICI bank in mF. He argued that the

Chidambaram, at the final session.

standardised models deployed by

Appreciative of the demands raised by

banking institutions would only work in

Ms Bhatt, the minister lauded the

an urban environment. In fact, the

a c t i v i t i e s of the sector in poverty

partnership model proposed by ICICI

alleviation. Cautioning against the

Bank was similar to the correspondent

clamour for regulation, the minister

banking in vogue in Brazil. Given the

argued that the flexibility of the sector

possibility that the bank could suddenly

would be negatively affected if brought

retreat from the field of mF, the mFIs could

under  the  regulatory  umbrella.

be at risk. To cope with that risk, he urged

N o n e t h e l e s s , he yielded that only

the creation of a credit bureau, which

deposit- taking mFIs should be put under

through detailed personal identification

surveillance, lest the flexibility required

numbers would go a long way in even

for furthering developmental activities

offering interest rate concessions to

get nipped in the bud. He wanted the

creditworthy borrowers.

sector to formally chart out the modalities

of the MFRDA. He drew attention to the

Vinod Rai, Additional Secretary, MoF, said

fact that the banks were depositing far

that one of the most important reasons

more than mandatory in government

behind the low offtake of credit,

securities (SLR). He suggested that only

particularly in the housing sector, had

those mFIs that were rated should be

been the lack of proper land records. He

allowed to take deposits and that the

Nonetheless, he

cautioned against any moves that

mFIs should be ready to shoulder the

yielded that only

would bring about interest rate ceilings

responsibility of creating capacities in the

deposit- taking

in the mF sector, for the inherent strength

SHGs and undertake the responsibility of

mFIs should be

of the sector had been in its ability to get

credit-rating them.

put under

out of the web of the subsidy-syndrome.

surveillance, lest

In fact, the two-day SIDBI-Sa-Dhan

the flexibility

P r o f V S Vyas, in his presentation,

Conference proved to be an important

required for

lamented the inability of the public

milestone in the history of credit in India.

furthering

sector banks to reach out to the poorer

In setting the tone for mainstreaming mF

developmental

sections in the rural areas, despite this

and initiating steps towards concretising

activities get

being one of the forces behind

the demands for a legal and regulatory

nipped in the bud

nationalisation. The breakthrough made

framework, the Conference was indeed

by  the  bank-SHG  programme

successful.

notwithstanding, mFIs ought to be