9 Million Indian Microfinance Clients Crossed $1.25 a Day Threshold

Wednesday, August 17, 2011

Counting the net number of people who crossed from below the USD 1.25 a day consumption in India between 1990 and 2010, a study by India Development Foundation (IDF) shows that nearly 9 million Indian households involved in microfinance – including approximately 45 million family members moved above USD 1.25 threshold during the last two decades.

According to the IDF report which was released by the Microcredit Summit Campaign, a program of the US-based advocacy group RESULTS Educational Fund, the movement out of poverty is highest for clients who have been associated with an MFI for a period of 4-6 years.

Surveying more than 15, 000 Indian households, the study finds that 37% of all clients were poorest (below the USD 1.25 a day consumption threshold) when they joined an MFI and the percentage of poorest clients when they joined is much higher in rural areas (40%) compared to urban areas (25%).

A net of 12% of all NBFC, NGO-SHG and SHG banked linkage clients crossed the threshold from below. In the case of NBFC-JLG, a net of 10% crossed the threshold from below.

27 MFIs and 6 SHG Bank linked NGOs participated in the study from across 14 states and 63 districts of the country.

The survey was largely completed, however, before the microfinance crisis in Andhra Pradesh erupted at the end of 2010 greatly reducing the number of households served.

“This report is good news, coming out seven months after a similar survey showed significant progress in Bangladesh,” said Sam Daley-Harris, Director of the Microcredit Summit Campaign. “Neither survey was designed to assign causality to microfinance, but there is a significant correlation in both India and Bangladesh between the presence of microfinance and movement out of poverty in the rural areas of both countries, especially in the early years. The survey period in Bangladesh reflected significant movement out of poverty between 1990 and 1998 followed by a dramatic drop due to massive floods in 1998. In India, the ’flood’ might be seen in the crisis in the microfinance sector but that crisis is not reflected in these findings.”

This report comes in the wake of a tremendously successful initial public offering (IPO) in 2010 by SKS in India followed by serious charges about some microfinance practices in that country and a strangling backlash by the Andhra Pradesh government.

Source: Microfinance Focus (link opens in a new window)