Microfinance gets the ’big’ idea, by Saswati Chakravarty and J Padmapriya

Wednesday, June 1, 2005

The movement may well have started two decades ago as a small measure to help the poor. But Indian microfinance institutions (MFIs) have today outgrown their shoes. They are looking at new structures and fresh funds to scale up in a market where demand outpaces supply by miles. Leading MFIs will tell you that there is a full-blown business opportunity waiting to be tapped.

Don’t be surprised if many of these organisations, working at grass-root levels, have drawn up blueprints that eagerly set profit targets, margins, return on investment and, hold your breath, attract venture capital, partnerships with leading banks and equity investments. Ramesh Ramanathan, vice-chairman of Sanghamitra (a MFI promoted by Myrada), says: ?Today, microfinance is a market opportunity. It is no longer just about doing social good. We need to look at this as an industry.?

Though there are no precise figures available, back of the envelope calculations put the microfinance industry’s appetite for credit at around Rs 2,00,000 crore. Against this, a meagre Rs 5,000 crore, as recorded in bank outstandings, is flowing through this channel. Incidentally, contrary to bankers’ experience, most MFIs see over 95% loan recoveries.
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Source: The Economic Times