Commercialization is necessary for microfinance : Bandhan chief

C.S.Ghosh, CEO of Bandhan microfinance,  on Commercialization

Microfinance Focus: Has the growing commercialization of microfinance institutions impacted the MFIs’ commitment to address alleviating poverty as their primary objective?

Irrespective of its impact, I believe that commercialization is necessary. An institution cannot become sustainable until it is commercialized. Subsidy can never give sustainability, it will only give dependence – all of us are aware of this, but tend to ignore this sometimes. In order to alleviate the large scale poverty in a big country like India, the institutions ought to scale up. We must remember that ‘Small is beautiful but big is necessary!’And if one scales up, commercialization is bound to happen. If a MFI is looking at making a significant contribution towards poverty alleviation, then it has to increase its volume. Cost effectiveness and efficiency is also taken care of when one increases its volume.

The commitment concern is being raised as some commercial minded people are entering the sector since they are allured by the immense scope of growth and success of the microfinance sector. I think I agree that the growing commercialization does have a hit on the commitment, for instance, the PE investors push for higher profits – and this does have an impact. But at the same time it may not be right for us to hold them responsible totally for this growing commercialization. There are other factors also that play behind this. But it all depends on the leader, I guess. His mindset and inclination to work for the poor has to be on the right track. If the leader is committed to alleviate poverty as its primary objective then the institution shall also be unswerving to its goal.