Beyond the Impasse Options for the Microfinance Sector

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ACCESS Development Services brings together government ministers and industry experts to focus their attention on how to move beyond the crisis in the industry.

New Delhi,India., December 13, 2011 - (PressReleasePoint) -

The 8^th Microfinance India Summit was inaugurated today in New Delhi. Mr. Y C Nanda, Chairman, Microfinance India Advisory Group in his welcome address set the tone for the two days. He said, “This year’s Microfinance India Summit has come at the right time, as we are striving for the betterment of the people linked to micro credit. Though, it will be a challenge to push the boundaries and reach the unreachable, closing down the gaps in terms of commitments and actual practice would be a perfect start to make the Millennium Development Goals a reality.”
 
The Microfinance India State of the Sector Report was released in the inaugural followed by the initiatory standard plenary session on the current plight of the sector. N. Srinivasan, author of the report, remarked, “The sector is aware of the problems and issues, which have a burdening effect of late. The future is not about rectifying the problems, it’s about doing things differently. Change management is what we need at this point in time. We simply need to Retool, Reengineer, Revisit and Reinvent.”
 
Vijay Kumar, Joint Secretary, Ministry of Rural Development, National Rural Livelihoods Mission, in the Plenary Session II on the SHG movement, commented, “[The] client is at the centre of all Microfinance related issues and we have to take these generic lessons from context specific innovations by NGOs, Government and other organizations to make them the centre of deliverance as well.”
 
In the afternoon Nandan Nilekani, Chairman, Unique Identification Authority of India (UIDAI), expounded on the role of unique identification numbers as a path breaking initiative of the Government of India and strategic opportunity to support and enhance financial inclusion through banks. Nilekani voiced his opinion, ““UID is a path breaking initiative of the Government of India, which will create an opportunity to address the existing limitations in financial inclusion. UID will make sure that the transactions of different financial products become easier, hassle free and add value at the same time.”
 
Today, the microfinance industry is gasping for survival. The Andhra Pradesh Microfinance Institutions (Regulation of Moneylending) Act, 2010 came down hard about 15 months ago on MFIs for what it thought was predatory lending practices. Given the bad press, it severely curbed fresh lending and impacted recovery of loans in the state. Thus of the Rs 20,000 crore MFI industry in India, at least Rs 7,000 crore is set to become bad debts in Andhra Pradesh, the state with the highest concentration of the MFI industry. The MFIs will have to raise as much as Rs 5,000 crore by March 2012 as equity on account of these non-recovered loans through equity, according to Alok Prasad, CEO, MFIN. With bank’s reluctant to lend, MFIs across the country are facing the heat of the Andhra Pradesh regulations. Recovery dropped from 100 per cent to less than 5 per cent in the last one year. “Prehaps the sector will take a longtime to recover from its current downturn, and perhaps only after a formal regulation is in place will the confidence between funders and investors return,” Vipin Sharma, CEO, ACCESS Development Services