Liz Larson

After the MFI Collapse, Uniting Financial Inclusion Data in India

In late 2010, the microfinance industry in Andhra Pradesh (AP) collapsed. AP had formerly been the home of an estimated one-fifth of India’s 32 million microfinance borrowers at that time. While experts may fail to pinpoint an exact moment that caused the calamity, most watchers of the sector agree that several rural suicides in combination with some of the highest growth rates the microfinance industry has ever seen created a political tinderbox that spelled crisis in AP. As the microfinance industry picks up the pieces and moves on, the dialog about microfinance has shifted permanently and profoundly. The crisis aftermath places microfinance as one area in the greater financial inclusion landscape of India, not the center of the universe.

Over the last several years, various actors have responded to this shift by creating, using or presenting microfinance and financial inclusion data in new and innovative ways. Here are a few examples:

  • PMN: Building off years of quality data and corresponding online benchmarking tools, PMN launched MicroEye, a dynamic, interactive map of Pakistan which hosts microfinance, human development and conflict area information.
  • CMF: The Center for Microfinance created a mapping exercise that examines penetration of microfinance services, including Banking Correspondents (BCs) in India.
  • MIX: MIX has worked with the MasterCard Foundation to build financial inclusion maps across sub-Saharan Africa, including for Nigeria, South Africa, Rwanda and Kenya.These maps include layers of information on branch locations, clients, infrastructure, population rates and many other sets of information that can be used in various combinations.
  • CGAP: With support of the Gates Foundation, CGAP built the Global Findex Database, a comprehensive database with measures use of financial products and services in almost 150 countries across the globe.

These initiatives are a part of the global effort to collect and analyze a broader set of financial inclusion information, bringing together data that helps operators, funders, policy makers and others answer questions that are relevant to their own development.

In India, these questions could not be more pertinent. To build off previous efforts to unite financial inclusion datasets, MIX, with funding from Citi Foundation, is building an interactive mapping platform to house and present a range of financial inclusion data on India, down to the district level. MIX and partner MFIN kicked off the project with a workshop in Gurgoan in April 2012 that convened a group of stakeholders from the operations, policy, investment and regulatory worlds. Understanding the concerns and needs of local actors is the bedrock for creating a usable, relevant platform that could provide data to a wide range of users, and cover a wide range of questions. Participants unilaterally agreed that there was a strong need for better information on the spectrum of financial services and channels serving unbanked Indians. The initial discussion of the workshop was organized around four themes:
  • Supply of financial inclusion-related services: This theme centered around the geospatial landscape of MFIs, self help groups, banking agents and other service providers to identify the saturated and under-served areas on the map. Where are the “white spots” on the map? Where and how extensive is the overlap of various services?
  • Performance of products and channels: Keeping the recent crisis in mind, the group sought to further understand the various qualities or levels of sustainability of MFI types or products. What does product access look like by channel? Which products are the most successful and where? Are the current innovations, like BCs and no-frills accounts successful?
  • Public policy: The lack of clarity in the current policy environment is preventing many in microfinance from moving forward, and participants agreed that reaching policy makers, either directly or indirectly, should be a central use case for financial inclusion data. Is microfinance successfully reaching poor clients?
  • Demand side: Participants noted a general blind spot about demand. It is not historically been the focus, but studies of under- or mis-used products are now common, as well as a deeper questioning into the very premise of microfinance. How do we measure access versus use? Is microfinance a tool for poverty alleviation?

After this discussion, participants reviewed several current approaches taken to address information gaps, from representatives of Ujjivan, M-Cril and CMF. Several information services meet aspects of the priority questions, but no current offering provided a comprehensive view onto financial inclusion. Participants concluded that the sector would benefit most from a platform that could address two important challenges: rallying existing data stewards to share data and NextBillion readers: Stay tuned for further updates on the map project in November. aggregating the data from across the various silos into a single platform.

With this fruitful discussion informing the next phases of the project, MIX is currently involved in rallying and mapping what data exists and where, and how to unite it in one place. The detailed map will be launched this November in India and will be available on the MIX website.

NextBillion readers: Stay tuned for further updates on the map project in November.

Impact Assessment