The Centre for Micro Finance (CMF) and the College of Agricultural Banking (CAB) organized the 5th round of the annual conference titled ‘Microfinance: Translating Research into Practice’ in January, 2012. The objective of the conference was to actively engage stakeholders and researchers in discussions relevant to current and future microfinance practice.
During the inaugural session, Ms. Kamala Rajan, Principal of CAB, mentioned that the microfinance sector in India has surprisingly achieved positive growth this year despite the crisis in Andhra Pradesh and related fears and funding issues. Adding to that point, Dr Prakash Bakshi, Chairman of NABARD, mentioned that the history of the microfinance industry in India is very much in line with the history of Indian banking, though, he also pinpointed that despite the different parameters to determine poor and poverty – we are yet to arrive at a common standard and that time has come where bankers will have to rely on evidence from research studies which can be translated into practice. He added that the current scenario calls for new processes, methodologies and innovative ways by which more work can be done towards enhancing the prosperity and security for the poor.
The second session focused on Government programmes and measures in rural employment generation. The panelists had an in-depth discussion about the various facets of Government initiatives and what they intend to do in the future. Mr Sudhir Thakre from the Maharashtra Government mentioned that for sustainable development, one needs to look at the structure, strategy and the facilitator. He encouraged researchers to measure success stories so that the metrics of the same would become the new standard on the basis of which replication or modification will be decided in other areas. He added that the delivery mechanisms need to be clearly thought out before rolling out a program, only then some meaningful change can be brought about.
This was followed by a special presentation by Dr SL Kumbhare, Chief General Manager, Micro Credit Innovation Department, NABARD, on SHG Programme Version 2 and its main features.
The third session of the day dealt with the psychology behind mass defaults in joint liability loans. Lisa Nestor, Research Associate, CMF, presented a preliminary study on mass defaults that occurred in certain parts of east Maharashtra. Presiding over the session, Annie Duflo, Executive Director, IPA, shared that an avenue for future research would be on how to mitigate contagion effect. The panelists shared their concerns by mentioning that though client engagement was high in Andhra Pradesh, it was not so in the case of a few MFIs where the relationships were not personal, which slowly deteriorated the state of affairs. Yet, the exact reasons behind a mass default remain uncertain. The future of financial services for the poor was the final topic to be discussed on day one. Ms TF Thekkekara opined that the microfinance industry is at the crossroads globally as well as in India. Though microfinance has smoothed consumption and empowered women, poverty alleviation still remains a challenge.
Graham Wright from MicroSave mentioned that looking at the demand side, the poor have a wide range of financial services that they seek and credit is not their top priority, contrary to popular belief. Savings
need to be looked at with top priority by all stakeholders. He added that the poor do not have secure reserves to build on the credit that they get and thus diverse set of financial needs need to be realized. The panelists suggested that the bulk of changes would be happening at the MFI level and in the regulatory framework. Understanding the dimension of the livelihoods of the poor and the use of new technologies hold the key to the future.
The second day of the conference began with the session on whether financial literacy can accelerate the financial inclusion drive. Deeptha Umapathy and Parul Agarwal from CMF who have conducted studies on financial literacy mentioned that it is not just the financial products are complex, but the beneficiaries themselves as well. Taking cue from his experiences in Jharkhand, MV Ashok, NABARD (Pune) was of the opinion that one must take into account the sources of income for the rural poor. The aspect of whether the source of income is agrarian or via remittances is relevant, contextual aspect needs to be considered so that a better understanding of how financial literacy works can be achieved.
The final session focused on the scope and opportunities that lay in financing microfinance. The panelists suggested that a strong market infrastructure and good underwriting guidelines will help the industry in the long run. The strength of customer relationship and the protection standards are also areas that need to be looked at seriously. The valedictory session of the conference was given by former Chairman of NABARD, YC Nanda. He reminded everyone that microfinance sector exists to serve the poor and we must realize that whatever objectives we set out for the future, as far as microfinance industry is concerned, the basic ideas of social welfare should not be ignored.