Value lending for MFIs to reduce risk
Friday, April 11, 2014
Tara Thiagarajan, chairman & MD of non-banking finance company-micro finance institution (NBFC-MFI) Madura Microfinance, is trying out a unique experiment. A PhD in neuroscience from Stanford University, she has been pioneering the use of analytics in the MFI sector, which, she says, has helped Madura to be among the most cost-efficient MFIs worldwide. In an interview with Arun S, she explains why her concept of ‘value lending’ is crucial to the sector.
How have you been using your neuroscience background and analytics to make Madura very cost-efficient?
We have been using science and analytics, not primarily on cost, but to understand the rural ecosystems in which we work, so that we can design new products that can be more effective and better manage the risk. Lending today is very commoditised and, sometimes, can be detrimental to the larger system, creating an unproductive debt burden rather than economic growth.