One of the big discussions at the Microfinance India Summit 2009 was that involving savings. Clearly this is an area of great importance, as was stressed repeatedly over the last two days by panelists and delegates at the event.

Both the panels on savings and bank correspondents discussed a number of salient issues with regards to the area of financial inclusion. Where Indian MFIs have achieved great heights in the area of providing small credit, there is still lots to achieved if existing red tape gives way to the requests of the industry– let the poor save in a safe and convenient way.

Vikram Akula of SKS alsp proposed a number of ways through deposit-taking can be adopted in a practical way, such that clients benefit and MFI staff are safe while carrying around cash. Hopefully, in the near future, we will see changes in the existing framework set up by the RBI. While the Summit addressed the achievements of the past year, discussions on topics such as this made it apparent that the industry still has lots to achieve.

The fact that microfinance has been a successful business model for poverty alleviation is undisputed (operational quibbles notwithstanding). The reason is that Grameen bank turned conventional wisdom on its head and made the unbankable (people with no collateral) into safe banking bets. Once they proved that the model was financially sustainable – the world followed suit. Now we are even potentially looking at IPO’s for microfinance institutions like SKS and others.

So what is next? If microfinance 1.0 was about betting on the innate entrepreneurship of people, microfinance 2.0 will be about betting on technology (providing scale by lowering cost)  for opportunity creation in helping the poor in changing the world. A partnership with social entrepreneurs can pave the way because they typically look for sustainability and are technology savvy. Unfortunately, for them capital is still hard to come by especially for social entrepreneurs involved in changing the rural economy through innovations in renewable energy (like solar for lighting) or education (e-content for education) or healthcare. Government institutions involved with rural development should especially take note as they can provide scale and sustainability to social entrepreneurs. The Jaipur foot is a good example of medical technology that got a boost from a government partnership. Right now when India is so visible in the climate change debate, by investing in companies bringing solar to rural – off grid areas – would strategic. Companies like SELCO, D.Light, Duron energy are good investments for microfinance or NABARD (Govt. bank). It has long been held that research is expensive and emerging economies need only be markets. This is no longer the case when technologies of the developed world do not scale to meet the needs of the emerging economies.

I am looking forward to my session ‘Revitalizing the Rural Economy’. The moderator for this session is Biswajit Sen. The session is scheduled for October 28, 2009 from 1600 to 1715 hrs at the Taj Palace Hotel, New Delhi. The session brief is as follows: 

“Various initiatives have been made to revitalize the rural economy and mainstream them into the promising economic growth. One of such example is the flagship large scale government program – NREGS. This programme is mandated to strengthen and boost the rural economy through ensuring minimum employability in the rural areas. Besides NREGS, NABARD, the lead bank especially targeting agriculture in India, has been leading various interventions to strengthen the rural economy, primarily the Rural Infrastructure Development Fund that has been instituted to boost the rural infrastructure. These different initiatives have been successful with their own set of challenges. This session envisages deliberating on the challenges of these initiatives and hence drawing on the learnings for future strategies.”

If you have ideas on the subject – its a good time to speak out – I am still formulating my final thoughts and recommendations.

This year (Jan 15,16 2009 at Stanford) the annual King Holiday celebration theme was Education for Global Liberation. Among other events, there was a panel discussion with three educators/activists from India. These educators have developed educational curricula different from traditional models in that social awareness and justice is built into the classroom experience starting grade 1. From Riverside School in Ahemdabad, for children from relatively affluent backgrounds, to Manzil for urban lower middle class children to Manav Sadhana for the poorest of kids, each school is a product of inspired leadership. Ravi Gulati says his MBA education, with its focus on increasing consumption to increase market, as having been the catalyst in seeking alternative economic models which led to an examination of the education system. What happened to the values he learned as a child in an average middle class family, where frugality was the ethic of choice? Encouraging consumption as a market driver, leads to a scarcity mentality where no matter how much you have , you never feel you have enough. He wants to create an education system based on an “abundance mentality”. Viren Joshi spoke about a child from his slum school who returned a large sum of cash he found in the street simply because “it was not his” a natural behavior of the values learned in school.
So how does one instill ethics and social justice into young minds? How does one get away from the “don’t know = don’t care” syndrome? I got some answers from these educators who talk about the values they instill “To whom much is given much is expected”; They ask their students to ask themselves “what am I doing to “preserve” my rights?” “What am I doing to “deserve” my rights”. Speakers

There is a Chinese proverb that goes something like this: if you want to plan for a year, plant a rice field, if you want to plan for ten years, plant a tree and if you want to plan for the future, educate your child. Microfinance is addressing the 1-10 year scenario which is pretty great. But last year, at the Tech Awards (http://www.techawards.org/) I heard of a business model innovation – a partnership – that addresses the future. It is a combination microfinance plus education model. In this model, women who receive loans are encouraged to send their children to a partner education NGO for “free” or at a subsidised rate. The partner institutions decide how the finances are shared (the interest payments) for optimal sustainability of both organisations. This is a win-win model where the women are encouraged to make a go of the business, (education is a social benefit – unquantifiable through standard metrics), microfinace institutions have to do less policing about the use of their funds and education NGO gets students who’s parents care.

Countries with severe poverty are also plagued with prejudice against women, poor health among children and a growing opportunity gap between the rich and the poor. UNESCO proclaimed September 8 as International Literacy Day in 1965 to highlight the role of education in addressing these issues but while its importance is universally acknowledged, the deployment of quality education in developing economies has proved unsuccessful. This is also true for India where, in spite of a great rise in economic stature of the nation in recent years, the literacy divide is as great as it was prior to the IT boom. The success stories of opportunity inclusion come from the microfinance sector. So wouldn’t it be nice if we could leverage the success of the microfinance model to do more? Like maybe provide quality education to those left behind bythe current system?

Every year I try to do one hike in the Himalayas. It takes me back to my roots in Dehra Dun, inspires, energises and engenders hope. So in September 2008, when we did the gruelling 14km uphill trek to an elevation of 3584m (Gaurikund to Kedarnath), as usual, the mountains were unimaginably majestic but on this hike I saw something unexpected- man-made but equally mesmerising for me. Beyond the hike trail, on the dirt path to the last village on the India border, there flew a banner that read something like “Proud to reach 100% financial inclusion – State Bank of India”. I wish I had had the presence of mind to take a picture (too tired is my excuse). Sure it is an ad. But look at the lofty goal. In a country largely supported by a rural population, where less than 50% bank and even fewer have access to credit, to reach the remotest corner of India with a goal of 100% financial inclusion is nothing short of ambitious. And indeed, all the huts I saw looked clean, had roofs and there were tiny, immaculate gardens with cabbage, cauliflower growing; chickens running around and nobody looked cold or hungry. For developing economies, microfinance (and micro-franchising) must become mainstream. So I am pleased to be invited to the Microfinance India Summit to be held October 26-28, 2009 at Taj Palace Hotel, New Delhi. The theme this year is “Doing Good and Doing Well: The need for balance”. The summit will look at both the trade-offs and points of convergence as the sector grapples to balance between building the social as well as the financial capital; scale and soul; social performance measurement; client protection; products and services that the poor need; and issues linked to last-mile connectivity, among others. I also look forward to interviewing ordinary and extraordinary folks I meet at the conference – so send me your questions and I’ll report back on what I hear – right here.

September 14, 2009   2 Comments