Sa-Dhan Newsletter Volume 3 Issue 2

Microfinance Regulation

more on the possibilities of micro credit  as a socially

do not suggest a biased relationship in which the provider

significant and commercially attractive mode of credit delivery,

being more powerful and resourceful imposes its will and

a meeting involving all major players was organised in the

ideas on the hapless, subservient borrowers. Instead, they

newly created state of Jharkhand in February 2002 where the

appear more like partner who discuss and jointly define

possibilities for financial intermediation as an effective anti

objective and ways of attaining them. More importantly an

poverty strategy in Jharkhand provided all out efforts are

increases in the degree of institutional linkage leading to

made to put an appropriate micro credit delivery Systems in

deepening of the systems of employment and welfare.

place were highlighted.

Sensitising bankers and MFI staffers both at controlling

offices and at ground level about this is imperative. This

Whereas our impact analysis has sought to determine if the

should be part of the integrated approach.

intervention has had the desired outcome, face offs with

member borrowers revealed net gain in income within this

The Rs. 100 core Micro Finance Development Fund set up in

sub -sector of the hitherto predominantly informal economy,

NABARD, to which RBI has contributed Rs. 40 crore, marks

Indeed, the need to shift from a minilist approach that is

an important step in this direction. Besides giving training

offering only financial intermediation to an integrated approach

and exposure to SHG members, partner NGOs, bank and

taking a more hoslistic of the client including provision of

Government agencies this Fund is also geared to provide start

enterprises development services like marketing infrastructure

up funds to microfinance institutions (MFIs) and meet the

with direct linkage between the borrowers and potential

cost of formation nurturing of SHGs. I hope that the providers

buyers, introduction of technology and design development

will make optimum use of this Fund for designing delivery

has assumed immediacy. There is no gainsaying the fact that

mechanisms and marketing up volumes.

there is urgent need for such an integrated approach, which

Keeping in view these initiatives for enabling the micro

in turn presupposes banks, MFIs, local govt. agencies, NGOs

finance movement in our country to gain momentum, Govt.

and SHGs to evolve as attractive partners in decentralized,

of India has allowed foreign direct investment in micro / rural

rooted in the local community kind of set up. This idea of

credit to encourage foreign participation in micro finance

what has come to be known as Smart Partnership also

projects. Further, we have exempted MFIs registered as not for

envisages training for facilities or re- orienting support

profit non banking financial companies (NBFCs) and not

systems and linking groups of poor to sensitive support

accepting deposits from the requirement for registration,

systems in such new partnership. A interesting offshoot of

maintenance of a certain percentage of their liquid assets and

such a partnership will be the MFI - borrower equation that

contribution to the Reserve Fund.

Shri Vepa Kamesam delivering the inaugural speech

at the Sa-Dhan Annual Policy Forum on 4th September, 2002

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