Interview with L&T Finance Vice-President Dinanath Dubashi

(An interview by Priyanka Jayashankar)

Can you share your perspective on L&T Microfinance growth and expansion strategy across India?

L&T Finance, which has grown from a Rs 700-crore to a Rs 5000-crore company,  provides a range of financial services such as tractor and construction equipment financing across rural areas. We entered the microfinance sector in 2008 and currently, we are adding 70,000 to 75,000 clients each month.  Our gross loan portfolio has grown to Rs 450 crore.

L&T Microfinance has primarily focused on the South Indian markets since it was established in 2008. Is the MFI foraying into Orissa and Gujarat due to the saturation of the microfinance market in South India?

The saturation of microfinance markets in South India is much hyped. Many districts in coastal Andhra Pradesh and Tamil Nadu do not have a high concentration of MFIs. The concentration of MFIs is higher urban areas – take for instance, the outskirts of Chennai.    Rural financing remains our core competency and there’s much scope for growth in the villages of South India. L&T Microfinance has gained prominence in Andhra Pradesh and Tamil Nadu, and it has also made in-roads into Maharashtra and Karnataka.  We are foraying into states such as Orissa in order to establish a pan-India presence.

The Indian microfinance sector, according to industry experts, is entering a consolidation mode. Are you planning to acquire regional MFIs to establish a pan-India presence?

L&T Finance is part of a nationally reputed conglomerate. We will continue to adopt an organic growth strategy to enter new markets and there are no plans for takeovers.

Are you exploring the possibilities of tapping private equity?

We have the financial backing of our parent company and private equity funding is not needed.  However,  we may scout for opportunities in the future to enhance technical expertise through private equity investment.

Are you providing business development services for micro-entrepreneurs?

We are doing a pilot study on livelihood models to foster micro-entrepreneurship. L&T Microfinance needs a critical mass of clients before rolling out business development services.

Is L&T Microfinance also reaching out to micro-entrepreneurs who are graduating into the SME category?

The Gram Bandhu scheme has been developed for joint liability groups.  Micro-entrepreneurs who can graduate into the SME category may avail of the Udyog Bandhu scheme. However, it will take at least a few years to make a substantial number of Gram Bandhu clients graduate into Udyog Bandhu scheme.

Do you have a social performance management system in place?

A critical mass of clients is needed before we implement a SPM system. We are still concentrating on establishing our presence across the country.

The debate on mission drift in the microfinance sector has intensified in recent times. How does L&T Microfinance strike a balance between its social mission and financial targets?

As a publicly listed company, Larsen and Toubro has contributed to nation building. L&T Microfinance’s mission statement has a strong thrust on socio-economic empowerment.  Socio-economic change cannot be brought about by merely providing loans to women micro-entrepreneurs.  L&T Microfinance implements CSR projects in the villages in which it is operating. We have provided education and sanitation facilities to empower rural communities.