Friday, August 10, 2012

The grand papa of microFinance - oh la la !

The grand papa of microfinance – ohh la la !

I had an occasion of being a part of the Financial inclusion conclave “ the first mile walk to Financial inclusion” organised by sadhan at New Delhi on 7-8 Aug 2012 at New Delhi . The title was very apt and many speakers including the RBI, Deputy Governor commented on the creativeness of the title . The event however, never showcased much of it; with topic like microfinance regulation and SHG federations etc. the beauty of the meet however, was the large participation of the SHG members, who were panellists; we had an exclusive session with them moderated by a CEO of Development Support Team, Pune. Though many complained about the banks not giving credit, most of the clients spoke about the savings balances they maintain and the other benefits that accrued due to their being a part of SHG.

Well, my purpose of writing this piece is to inform about the great dampener session which was the penultimate one on microfinance regulation with Mythili Bhusurmath in the chair, Umarji, Anuraj jain of DFS and the grand dad of microfinance. While everyone spoke the current bill and the good things it can do; but, the grand dad had only one agenda – “blast the AP govt”. He went off at a tangent not covering the bill but castigating the AP govt , telling everyone that they should be tried in a court. It was a virtual diatribe, stating they should be behind bars etc etc, especially when nobody was there from the AP govt to defend or state their point of view. It was at the end that the Chair asked the grand dad to stick to the topic on microfinance regulation and the present bill; for which the grand dad commented i wanted the word microfinance vandalism to be mentioned in the bill; and it be should a part of the microfinance lingo in the future. For a godfather who was once prudent, creative and propped up by NABARD in late 1980’s and then RBI and Government, now seems to make a joke of himself! I wish i posed these Q’s for him

1.      Did the godfather NOT foresee the risks of business, including the risks from external sources, even when perceives it this away.
2.      Did he believe that all the poor in the country live in AP? Was AP the only state where poverty existed; what prompted them to stay away from states that needed these services?
3.      Was he not aware of the microfinance crowding that was happening in AP? Was he not aware of the perils of overcrowding?
4.      What happened to his due diligence abilities of the business side?
5.      If as an industry, why did not learn from the earlier lessons when the first signs were out in 2006?
6.      Was their Code of conduct drafted for mere printing and lip service during conferences? Why was not it put in place to avoid such mishaps?
7.      If the grand pa thought that other mFIs where responsible (which he keeps repeating) not him and his company, why were they not restrained by the association?
8.      If the case is subjudice; cannot the grandpa wait for the final outcome? RBI had only recently filed its affidavit on jurisdictional issue and that too for NBFC which it regulates?
9.      If the RBI regulation was weak  for NBFC ( grand pa has a NBFC); why did not tell this to RBI ?
10.  What happened to client level trust which his mFI had built, and why did the client ditch him?-  i ask this because i had heard him reply to a Q in previous conference meeting at Gujarat Govt in 2008; where a participant asked about mass default by mFI client in Anand, Gujarat. The grand dad’s reply was “ we built trust with clients and they don’t default en-mass    
11.  The AP Act states not more than 2 loans to a client; if it’s more they reserve it, while mFI target the same segment, overcrowd and there are instances of 5-9 loans to one family – does grandpa’s NBFC do a KYC and realize that the client has already got an outstanding 2-4 loans and his loan is the n th, could he not avoid them ?. Did he purposely plunge his fingers into fire and now blaming the fire for it ?

In all his monologue not a word about the client, except stating that “Now the 92 lakh poor families in AP are in debt with money lender at much higher rates” !!  So clients are quoted at their convenience. All request are made for relaxing that, allow this , allow that etc- in short at institution focused and see what they are doing. Well institutions are means to an end and not an end in itself. Institutional survival is not important, which should be determined by markets and its users, it has to be client interest which is paramount.   

Well, the good thing about the earlier part of the conference was it had a lot of SHG members, mFI clients were absent by their presence. Invariably every SHG member, who spoke ( and some did sing)  spoke about savings , but most of the panellists were keen about the credit not adequately following.

After the tirade  by the grandpa - i left the conference in a huch, with a very bad headache...yes literally !    

Now i am inclined to "Stand for something or you'll fall for everything".....

Works at NABARD for poor HH / was Research Affiliate at CDS, Tvm / was Visiting Faculty on microFinance for MBA students NMIMS, Mumbai.