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8/3/2019 Deepening Micro Finance Chennai
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Deepening MicrofinanceDeepening Microfinance
Tata-Dhan AcademyTata-Dhan Academy
04.03.201004.03.2010
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ContextContext
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Micro finance for poverty reductionMicro finance for poverty reduction
ContextContextMillennium Development Goals - an appropriate frameworkMillennium Development Goals - an appropriate frameworkfor micro finance industry to address poverty andfor micro finance industry to address poverty and
development issuesdevelopment issues
Scope for Beyond MDGsScope for Beyond MDGs
Characterizing poverty and development issuesCharacterizing poverty and development issues
Contextualizing microfinanceContextualizing microfinance
Micro credit microfinance developmentMicro credit microfinance development
financefinance
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Poverty reduction - HouseholdPoverty reduction - Household
Outreaching poorest of the poorOutreaching poorest of the poor
Ensuring food securityEnsuring food security
Providing security of shelterProviding security of shelter
Promoting educational securityPromoting educational security
Providing health securityProviding health security
Promoting and sustaining incomePromoting and sustaining incomesecuritysecurity
Sustaining social securitySustaining social security
Ensuring gender equality and equityEnsuring gender equality and equity
Protecting from risks andProtecting from risks and
vulnerabilitiesvulnerabilities
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Poverty reduction large scale phenomenaPoverty reduction large scale phenomena
Disaster situationsDisaster situations
Mass migrationMass migrationClimate changeClimate change
Sectoral development agriculture, business development,Sectoral development agriculture, business development,service sector, processing, manufacturing, marketing, etcservice sector, processing, manufacturing, marketing, etc
Remoteness and isolationsRemoteness and isolations
Conservation common property resources and energyConservation common property resources and energyNarrow skill baseNarrow skill base
Infrastructure electricity, communication, transport,Infrastructure electricity, communication, transport,water, drainage, services (health, education etc)water, drainage, services (health, education etc)
Diseases out breaksDiseases out breaks
Social and cultural issues related to children, adolescentSocial and cultural issues related to children, adolescentgirls, women, men, physically and mentally challengedgirls, women, men, physically and mentally challenged
Political environmentPolitical environment
Any localized issuesAny localized issues
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Available experienceAvailable experience
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Current statusCurrent status
microfinance has only reached about 10% of itsmicrofinance has only reached about 10% of itspotential market so farpotential market so far
microfinance is now a tested business model offersmicrofinance is now a tested business model offersvariety of financial products such as savingsvariety of financial products such as savingsaccount, productive loans including workingaccount, productive loans including workingcapital loans, micro insurance, and even housingcapital loans, micro insurance, and even housingfinance.finance.
Still evolution continues through experimentationStill evolution continues through experimentation
Established social capitals: SHG - federation,Established social capitals: SHG - federation,cooperatives, trade-unions, NHG PRIs, SHG cooperatives, trade-unions, NHG PRIs, SHG PLFs etcPLFs etcConceptualized into different phasesConceptualized into different phases
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Deepening microfinance - Social capitalDeepening microfinance - Social capital
StructureStructure
Self Help Groups and CooperativesSelf Help Groups and Cooperatives with mutual conceptwith mutual conceptApex bodiesApex bodies: federations and associations of cooperatives: federations and associations of cooperatives
DistinctDistinct governance and executive systemsgovernance and executive systems
SystemsSystems
Simple to complex operational systemsSimple to complex operational systems such assuch asaccounts, audit, meetings, byelaws, policies andaccounts, audit, meetings, byelaws, policies andprocedures, and management information, monitoring andprocedures, and management information, monitoring andevaluation, impact assessment etcevaluation, impact assessment etc
External linkagesExternal linkages banks, PRIs, networks, government banks, PRIs, networks, governmentand private service providers, and other local informal andand private service providers, and other local informal andformal associationsformal associations
Institutional building processesInstitutional building processes: defined goals and: defined goals andobjectives, HR processes, growth and development relatedobjectives, HR processes, growth and development relatedmechanisms, sustainability areas such as financial,mechanisms, sustainability areas such as financial,institutional and developmentinstitutional and development
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Deepening microfinance - FinancialDeepening microfinance - Financial
SavingsSavings
Diversified savings productsDiversified savings products: voluntary, purpose: voluntary, purposeoriented, compulsory, need based, cash and kindoriented, compulsory, need based, cash and kind
IncentivesIncentives: with or without interest on savings,: with or without interest on savings,withdrawal/non withdrawal savings, flexibilitywithdrawal/non withdrawal savings, flexibility
SecuritySecurity: deposit in the bank, rotate among the members: deposit in the bank, rotate among the membersas loans, temporary tapping in S/B account, keep it in theas loans, temporary tapping in S/B account, keep it in the
apex bodies, as investments etcapex bodies, as investments etc
CreditCredit
lending policieslending policies
Loan products-consumption, productive, housing and basicLoan products-consumption, productive, housing and basicamenities etcamenities etc
using savings only or with external funds for lendingusing savings only or with external funds for lendingAppraisals, loan graduation, credit absorption, term orAppraisals, loan graduation, credit absorption, term ormultiple loans, ROCmultiple loans, ROC
Repayment flexible or fixed amounts, period,Repayment flexible or fixed amounts, period,monitoring/lack of monitoring PAR at group/cooperatives,monitoring/lack of monitoring PAR at group/cooperatives,follow-up by banks or federations or promoters, loan cardsfollow-up by banks or federations or promoters, loan cardsetcetc
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Deepening microfinance - FinancialDeepening microfinance - Financial
Collaboration with government: SGSYCollaboration with government: SGSY
Handling subsidized credit, revolving funds, grantsHandling subsidized credit, revolving funds, grantsetcetc
Financial inclusion and financial literacyFinancial inclusion and financial literacy
Linkages different models, BC and BFLinkages different models, BC and BF
Cost coverage (financial sustainability)Cost coverage (financial sustainability)Multiple sources of funding and cross subsidizationMultiple sources of funding and cross subsidization
Promotional costPromotional cost
Corpus creationCorpus creation
Creation of development fundsCreation of development funds
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Deepening microfinance - FinancialDeepening microfinance - Financial
Micro InsuranceMicro Insurance
Different models: Partner agent model, community based modelDifferent models: Partner agent model, community based model Products: life, livestock, health, and weather indexProducts: life, livestock, health, and weather index
Micro pension: concept phaseMicro pension: concept phase
ReinsuranceReinsurance
Policy to facilitate promotion of pro-poor products by formalPolicy to facilitate promotion of pro-poor products by formal
insurance companiesinsurance companies Capacity building: concepts, principles, product design andCapacity building: concepts, principles, product design and
administration, insurance literacy and pilotingadministration, insurance literacy and piloting
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Deepening microfinance Livelihoods intermediationDeepening microfinance Livelihoods intermediation
Strengthening existing activities, revival of traditionalStrengthening existing activities, revival of traditional
activities, promotion of new activities,activities, promotion of new activities,
Individual activities, PPGs, group activitiesIndividual activities, PPGs, group activities
Registered companies: marketing, processing, inputRegistered companies: marketing, processing, input
purchase and supplypurchase and supply
Livelihoods framework: Basix, DHAN, PRADANLivelihoods framework: Basix, DHAN, PRADAN
Localized effortsLocalized effortsCommunity owned but professionally managed, facilitate tieCommunity owned but professionally managed, facilitate tie
ups with external agencies, promoters acts as agentsups with external agencies, promoters acts as agents
Sub-sectoral focus: agriculture, dairy, forestry, fishery,Sub-sectoral focus: agriculture, dairy, forestry, fishery,
poultry, artisans, handicrafts, home based activities,poultry, artisans, handicrafts, home based activities,
cottage industries etccottage industries etcExperimenting value chainExperimenting value chain
Migration as livelihood optionMigration as livelihood option
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Deepening: Civic intermediationDeepening: Civic intermediation
Health: holistic or particular health issues malaria,Health: holistic or particular health issues malaria,
HIV/AIDS, malnutrition etcHIV/AIDS, malnutrition etcDe-addictionDe-addiction
Education: remedial, model schools, evening schoolsEducation: remedial, model schools, evening schools
Slum development: drainage, sanitation, road and otherSlum development: drainage, sanitation, road and other
infrastructureinfrastructure
Rural and Tribal development: common property resourcesRural and Tribal development: common property resources
rehabilitation and management, basic amenities rehabilitation and management, basic amenities
Conservation and management: coastal resourcesConservation and management: coastal resources
Gender and developmentGender and development
Mainstreaming disaster managementMainstreaming disaster managementHuman rightsHuman rights
Old age, disabled, ultra poor who are excludedOld age, disabled, ultra poor who are excluded
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Areas for deepeningAreas for deepening
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Areas for deepeningAreas for deepening
Social capital (SHGs and Cooperatives)Social capital (SHGs and Cooperatives)
Special attention for hard- core poor through diversification andSpecial attention for hard- core poor through diversification andflexible products and establishing link between social safety net andflexible products and establishing link between social safety net andsubsidized program (Reaching the ultra poor experiment similar tosubsidized program (Reaching the ultra poor experiment similar toBRAC IGVGD (Income Generation for Vulnerable Groups Development)BRAC IGVGD (Income Generation for Vulnerable Groups Development)with government or direct TUP (Targeting Ultra Poor)with government or direct TUP (Targeting Ultra Poor)
Families which have come out of poverty: Role in social capitalFamilies which have come out of poverty: Role in social capital
Legitimizing SHGs and cooperatives at panchayat level (Kudubashree,Legitimizing SHGs and cooperatives at panchayat level (Kudubashree,Kerala model)Kerala model)
Promotional and investment cost in building SHGs and Cooperatives asPromotional and investment cost in building SHGs and Cooperatives aslocalized development institutions for generationslocalized development institutions for generations
Local networking banks, govt and development organizationsLocal networking banks, govt and development organizations
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Setting standard by practice and develop benchmark as aSetting standard by practice and develop benchmark as amodelmodel
Mechanisms to ensure homogeneity and reach of equitableMechanisms to ensure homogeneity and reach of equitablebenefitsbenefits
Positioning social capital as a development organization:Positioning social capital as a development organization:
clear institutional framework, purpose clarity withclear institutional framework, purpose clarity withgovernance and executive systemgovernance and executive system
Defined mission and vision for the organizationsDefined mission and vision for the organizations
Institutionalizing democratic process in SHGs andInstitutionalizing democratic process in SHGs andcooperativescooperatives
Satellite groups/cooperatives in remote areasSatellite groups/cooperatives in remote areas
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Financial intermediationFinancial intermediation
Tapping the savings potential into the system throughTapping the savings potential into the system throughsafety and security mechanisms and guidelinessafety and security mechanisms and guidelines
Sophisticated systems to track the financial performance atSophisticated systems to track the financial performance atmember and SHG/cooperatives level investment onmember and SHG/cooperatives level investment oncapacity building and providing necessary equipments andcapacity building and providing necessary equipments andfacilitiesfacilities
Individual subsidy to institutional subsidyIndividual subsidy to institutional subsidy
Financial inclusion and financial literacy through communityFinancial inclusion and financial literacy through communityorganizations to make the reach of banking services to allorganizations to make the reach of banking services to all
eligible peopleeligible people
Lending only through SHGs or Cooperatives by banks toLending only through SHGs or Cooperatives by banks toavoid multiple loansavoid multiple loans
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Financial intermediationFinancial intermediation
Remittance transfers and payments to experiment in placesRemittance transfers and payments to experiment in places
where the migration is traceable (within the state or acrosswhere the migration is traceable (within the state or acrossthe states)the states)
On-going capacity building for banks, NGOs andOn-going capacity building for banks, NGOs andgovernment through community organizations (as resourcegovernment through community organizations (as resourcecentres) in remote areas to initiate and intensify thecentres) in remote areas to initiate and intensify the
linkageslinkages
Guidelines to sensitize insurance companies on providingGuidelines to sensitize insurance companies on providingpro-poor productspro-poor products
Strengthen the demand driven credit serviceStrengthen the demand driven credit service
Corpus creation for sustainabilityCorpus creation for sustainability
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Livelihood intermediationLivelihood intermediation
SHGs/Cooperatives with NREGAs to ensure employment toSHGs/Cooperatives with NREGAs to ensure employment to
the needythe needy
Financial allocation (grant) for potential assessment forFinancial allocation (grant) for potential assessment for
livelihood promotion in an area/location (SGSY)livelihood promotion in an area/location (SGSY)
Wage based permanent job and assets creationWage based permanent job and assets creation
Financial assistance for skill building and promotingFinancial assistance for skill building and promotingentrepreneurship through SHGs and Cooperativesentrepreneurship through SHGs and Cooperatives
Providing infrastructure to SHGs/Cooperatives forProviding infrastructure to SHGs/Cooperatives for
promoting local markets (shandy)promoting local markets (shandy)
Promote community managed storage facilities for betterPromote community managed storage facilities for better
marketing of the produces and goods (government canmarketing of the produces and goods (government canallocate, wherever it is possible and feasible)allocate, wherever it is possible and feasible)
Attention on building local economy vibrantAttention on building local economy vibrant
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Civic intermediationCivic intermediation
Positioning the SHGs to avail primary health care servicesPositioning the SHGs to avail primary health care servicesfrom PHCs and government hospitals (health card from PHCs and government hospitals (health card
Pondicherry), secondary and tertiary services throughPondicherry), secondary and tertiary services through
referralsreferrals
Grant support to SHG-federations/cooperatives for healthGrant support to SHG-federations/cooperatives for health
literacy among their membersliteracy among their membersExperiment running a few model primary schools byExperiment running a few model primary schools by
SHG-federations/cooperativesSHG-federations/cooperatives
Promote and strengthen the linkage with PRIs for inclusionPromote and strengthen the linkage with PRIs for inclusion
of poor in the development planning, implementation andof poor in the development planning, implementation and
monitoring process.monitoring process.Support for providing special care and services for the oldSupport for providing special care and services for the old
age and disabled through SHGs/cooperatives (there are aage and disabled through SHGs/cooperatives (there are a
few people initiatives)few people initiatives)
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Connecting Microfinance and MDGsConnecting Microfinance and MDGsfor further deepeningfor further deepening
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Thank youThank you