Microfinance to the Rescue of the People at the Bottom
Monday, October 15, 2007
A top banker called on commercial banks to downscale to the ?Bottom of the Pyramid? for sustainable economic development ? sustenance of the poor and stressed the great importance of banking with the poor.Chandula AbeywickremaChandula Abeywickrema
The plea was made by Chandula Abeywickrema, Deputy General Manger, Banking and Network Management, Hatton National Bank making his presentation at the recently held Annual Convention of the Association of Professional Bankers, Sri Lanka.
He said “Commercial Banks can successfully down scale its operations for a sustainable microfinance programme and an objective for motivation is core to successful microfinance operations. Banks could profit from grassroots level banking and banks should design such products as deposits, micro insurance etc in conformity with the income and employment characteristics of the rural villagers.
“Convince Commercial Banks in the world that the poor and low income groups as viable business proposition”.
Over three billion poor people seek access to basic financial services to manage their lives and access to loans and deposits has empowered millions to work their way out of poverty, Abeywickrema, asserted.
Micro finance should no longer be considered as marginal or niche market but, the poor people should be considered as valued clients of the financial system of the country where financial institutions would provide them permanent financial services, considered to be at the bottom of the pyramid, though there could be challenges for the financial institutions of maintaining millions of small accounts rather than a few large accounts of the wealthy.
But the significance of loyalty and repayment of loans regularly in time are features that should not be ignored, which indicates that the poor values these services, he said. Commercial Banks would go faster beyond the double bottom line or even the triple bottom line when they taste the courage of convection by the poor, which would demonstrate that development through practical social performance indicators signify that financial and social performance go hand in hand when taking Commercial Banking to the bottom of the pyramid,” he said.
Quoting form “Fortunes at the bottom of the Pyramid” by C K Prahalad, Abeywickrema pointed out that the writer has dispelled dominant negative assumptions that the poor has no purchasing power, therefore they do not represent a viable market; the poor are not brand conscious, but, on the contrary the poor are very brand conscious and value conscious by necessity.
He said that traditionally banks in this country derive 80 percent of their income from a 20 percent from corporate, high networth and large and medium scale commercial enterprises. These banks face the challenge of either maintaining or increasing the size of the share of the market in a volatile economy like ours, Abeywckrema said.
The competition among the 12 foreign banks and 11 domestic banks has impacted to win over the profitable segment of this business and due to the above and of their value consciousness and price sensitiveness customer loyalty to any particular bank has diminished.
He said that banks focus on this segment and also concentrate the focus on Western Province (WP). So, Abeywickrema averred that the banks need to look beyond the traditional 80/20 rule and said that it is high time for the banks to redefine this rule.
He urged banks to create attractive opportunities for the majority 80 percent and look beyond the WP, in dispelling the economic vacuum and to bring economic revival to the now considered marginalized 80 percent, making the Bottom of the Pyramid more viable.
Abeywickrema said that strengthening of this 80 percent could only be possible if the income generation capacity or the purchasing power of the poor people is enhanced. He asserted that women, as a special segment of entrepreneurial poor, as they are more independent and active.
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