deepening micro finance chennai

8/3/2019 Deepening Micro Finance Chennai

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Deepening MicrofinanceDeepening Microfinance

Tata-Dhan AcademyTata-Dhan Academy

04.03.201004.03.2010


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ContextContext


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Micro finance for poverty reductionMicro finance for poverty reduction

ContextContextMillennium Development Goals - an appropriate frameworkMillennium Development Goals - an appropriate frameworkfor micro finance industry to address poverty andfor micro finance industry to address poverty and

development issuesdevelopment issues

Scope for Beyond MDGsScope for Beyond MDGs

Characterizing poverty and development issuesCharacterizing poverty and development issues

Contextualizing microfinanceContextualizing microfinance

Micro credit microfinance developmentMicro credit microfinance development

financefinance


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Poverty reduction - HouseholdPoverty reduction - Household

Outreaching poorest of the poorOutreaching poorest of the poor

Ensuring food securityEnsuring food security

Providing security of shelterProviding security of shelter

Promoting educational securityPromoting educational security

Providing health securityProviding health security

Promoting and sustaining incomePromoting and sustaining incomesecuritysecurity

Sustaining social securitySustaining social security

Ensuring gender equality and equityEnsuring gender equality and equity

Protecting from risks andProtecting from risks and

vulnerabilitiesvulnerabilities


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Poverty reduction large scale phenomenaPoverty reduction large scale phenomena

Disaster situationsDisaster situations

Mass migrationMass migrationClimate changeClimate change

Sectoral development agriculture, business development,Sectoral development agriculture, business development,service sector, processing, manufacturing, marketing, etcservice sector, processing, manufacturing, marketing, etc

Remoteness and isolationsRemoteness and isolations

Conservation common property resources and energyConservation common property resources and energyNarrow skill baseNarrow skill base

Infrastructure electricity, communication, transport,Infrastructure electricity, communication, transport,water, drainage, services (health, education etc)water, drainage, services (health, education etc)

Diseases out breaksDiseases out breaks

Social and cultural issues related to children, adolescentSocial and cultural issues related to children, adolescentgirls, women, men, physically and mentally challengedgirls, women, men, physically and mentally challenged

Political environmentPolitical environment

Any localized issuesAny localized issues


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Available experienceAvailable experience


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Current statusCurrent status

microfinance has only reached about 10% of itsmicrofinance has only reached about 10% of itspotential market so farpotential market so far

microfinance is now a tested business model offersmicrofinance is now a tested business model offersvariety of financial products such as savingsvariety of financial products such as savingsaccount, productive loans including workingaccount, productive loans including workingcapital loans, micro insurance, and even housingcapital loans, micro insurance, and even housingfinance.finance.

Still evolution continues through experimentationStill evolution continues through experimentation

Established social capitals: SHG - federation,Established social capitals: SHG - federation,cooperatives, trade-unions, NHG PRIs, SHG cooperatives, trade-unions, NHG PRIs, SHG PLFs etcPLFs etcConceptualized into different phasesConceptualized into different phases


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Deepening microfinance - Social capitalDeepening microfinance - Social capital

StructureStructure

Self Help Groups and CooperativesSelf Help Groups and Cooperatives with mutual conceptwith mutual conceptApex bodiesApex bodies: federations and associations of cooperatives: federations and associations of cooperatives

DistinctDistinct governance and executive systemsgovernance and executive systems

SystemsSystems

Simple to complex operational systemsSimple to complex operational systems such assuch asaccounts, audit, meetings, byelaws, policies andaccounts, audit, meetings, byelaws, policies andprocedures, and management information, monitoring andprocedures, and management information, monitoring andevaluation, impact assessment etcevaluation, impact assessment etc

External linkagesExternal linkages banks, PRIs, networks, government banks, PRIs, networks, governmentand private service providers, and other local informal andand private service providers, and other local informal andformal associationsformal associations

Institutional building processesInstitutional building processes: defined goals and: defined goals andobjectives, HR processes, growth and development relatedobjectives, HR processes, growth and development relatedmechanisms, sustainability areas such as financial,mechanisms, sustainability areas such as financial,institutional and developmentinstitutional and development


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Deepening microfinance - FinancialDeepening microfinance - Financial

SavingsSavings

Diversified savings productsDiversified savings products: voluntary, purpose: voluntary, purposeoriented, compulsory, need based, cash and kindoriented, compulsory, need based, cash and kind

IncentivesIncentives: with or without interest on savings,: with or without interest on savings,withdrawal/non withdrawal savings, flexibilitywithdrawal/non withdrawal savings, flexibility

SecuritySecurity: deposit in the bank, rotate among the members: deposit in the bank, rotate among the membersas loans, temporary tapping in S/B account, keep it in theas loans, temporary tapping in S/B account, keep it in the

apex bodies, as investments etcapex bodies, as investments etc

CreditCredit

lending policieslending policies

Loan products-consumption, productive, housing and basicLoan products-consumption, productive, housing and basicamenities etcamenities etc

using savings only or with external funds for lendingusing savings only or with external funds for lendingAppraisals, loan graduation, credit absorption, term orAppraisals, loan graduation, credit absorption, term ormultiple loans, ROCmultiple loans, ROC

Repayment flexible or fixed amounts, period,Repayment flexible or fixed amounts, period,monitoring/lack of monitoring PAR at group/cooperatives,monitoring/lack of monitoring PAR at group/cooperatives,follow-up by banks or federations or promoters, loan cardsfollow-up by banks or federations or promoters, loan cardsetcetc


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Collaboration with government: SGSYCollaboration with government: SGSY

Handling subsidized credit, revolving funds, grantsHandling subsidized credit, revolving funds, grantsetcetc

Financial inclusion and financial literacyFinancial inclusion and financial literacy

Linkages different models, BC and BFLinkages different models, BC and BF

Cost coverage (financial sustainability)Cost coverage (financial sustainability)Multiple sources of funding and cross subsidizationMultiple sources of funding and cross subsidization

Promotional costPromotional cost

Corpus creationCorpus creation

Creation of development fundsCreation of development funds


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Micro InsuranceMicro Insurance

Different models: Partner agent model, community based modelDifferent models: Partner agent model, community based model Products: life, livestock, health, and weather indexProducts: life, livestock, health, and weather index

Micro pension: concept phaseMicro pension: concept phase

ReinsuranceReinsurance

Policy to facilitate promotion of pro-poor products by formalPolicy to facilitate promotion of pro-poor products by formal

insurance companiesinsurance companies Capacity building: concepts, principles, product design andCapacity building: concepts, principles, product design and

administration, insurance literacy and pilotingadministration, insurance literacy and piloting


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Deepening microfinance Livelihoods intermediationDeepening microfinance Livelihoods intermediation

Strengthening existing activities, revival of traditionalStrengthening existing activities, revival of traditional

activities, promotion of new activities,activities, promotion of new activities,

Individual activities, PPGs, group activitiesIndividual activities, PPGs, group activities

Registered companies: marketing, processing, inputRegistered companies: marketing, processing, input

purchase and supplypurchase and supply

Livelihoods framework: Basix, DHAN, PRADANLivelihoods framework: Basix, DHAN, PRADAN

Localized effortsLocalized effortsCommunity owned but professionally managed, facilitate tieCommunity owned but professionally managed, facilitate tie

ups with external agencies, promoters acts as agentsups with external agencies, promoters acts as agents

Sub-sectoral focus: agriculture, dairy, forestry, fishery,Sub-sectoral focus: agriculture, dairy, forestry, fishery,

poultry, artisans, handicrafts, home based activities,poultry, artisans, handicrafts, home based activities,

cottage industries etccottage industries etcExperimenting value chainExperimenting value chain

Migration as livelihood optionMigration as livelihood option


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Deepening: Civic intermediationDeepening: Civic intermediation

Health: holistic or particular health issues malaria,Health: holistic or particular health issues malaria,

HIV/AIDS, malnutrition etcHIV/AIDS, malnutrition etcDe-addictionDe-addiction

Education: remedial, model schools, evening schoolsEducation: remedial, model schools, evening schools

Slum development: drainage, sanitation, road and otherSlum development: drainage, sanitation, road and other

infrastructureinfrastructure

Rural and Tribal development: common property resourcesRural and Tribal development: common property resources

rehabilitation and management, basic amenities rehabilitation and management, basic amenities

Conservation and management: coastal resourcesConservation and management: coastal resources

Gender and developmentGender and development

Mainstreaming disaster managementMainstreaming disaster managementHuman rightsHuman rights

Old age, disabled, ultra poor who are excludedOld age, disabled, ultra poor who are excluded


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Areas for deepeningAreas for deepening


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Areas for deepeningAreas for deepening

Social capital (SHGs and Cooperatives)Social capital (SHGs and Cooperatives)

Special attention for hard- core poor through diversification andSpecial attention for hard- core poor through diversification andflexible products and establishing link between social safety net andflexible products and establishing link between social safety net andsubsidized program (Reaching the ultra poor experiment similar tosubsidized program (Reaching the ultra poor experiment similar toBRAC IGVGD (Income Generation for Vulnerable Groups Development)BRAC IGVGD (Income Generation for Vulnerable Groups Development)with government or direct TUP (Targeting Ultra Poor)with government or direct TUP (Targeting Ultra Poor)

Families which have come out of poverty: Role in social capitalFamilies which have come out of poverty: Role in social capital

Legitimizing SHGs and cooperatives at panchayat level (Kudubashree,Legitimizing SHGs and cooperatives at panchayat level (Kudubashree,Kerala model)Kerala model)

Promotional and investment cost in building SHGs and Cooperatives asPromotional and investment cost in building SHGs and Cooperatives aslocalized development institutions for generationslocalized development institutions for generations

Local networking banks, govt and development organizationsLocal networking banks, govt and development organizations


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Setting standard by practice and develop benchmark as aSetting standard by practice and develop benchmark as amodelmodel

Mechanisms to ensure homogeneity and reach of equitableMechanisms to ensure homogeneity and reach of equitablebenefitsbenefits

Positioning social capital as a development organization:Positioning social capital as a development organization:

clear institutional framework, purpose clarity withclear institutional framework, purpose clarity withgovernance and executive systemgovernance and executive system

Defined mission and vision for the organizationsDefined mission and vision for the organizations

Institutionalizing democratic process in SHGs andInstitutionalizing democratic process in SHGs andcooperativescooperatives

Satellite groups/cooperatives in remote areasSatellite groups/cooperatives in remote areas


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Financial intermediationFinancial intermediation

Tapping the savings potential into the system throughTapping the savings potential into the system throughsafety and security mechanisms and guidelinessafety and security mechanisms and guidelines

Sophisticated systems to track the financial performance atSophisticated systems to track the financial performance atmember and SHG/cooperatives level investment onmember and SHG/cooperatives level investment oncapacity building and providing necessary equipments andcapacity building and providing necessary equipments andfacilitiesfacilities

Individual subsidy to institutional subsidyIndividual subsidy to institutional subsidy

Financial inclusion and financial literacy through communityFinancial inclusion and financial literacy through communityorganizations to make the reach of banking services to allorganizations to make the reach of banking services to all

eligible peopleeligible people

Lending only through SHGs or Cooperatives by banks toLending only through SHGs or Cooperatives by banks toavoid multiple loansavoid multiple loans


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Financial intermediationFinancial intermediation

Remittance transfers and payments to experiment in placesRemittance transfers and payments to experiment in places

where the migration is traceable (within the state or acrosswhere the migration is traceable (within the state or acrossthe states)the states)

On-going capacity building for banks, NGOs andOn-going capacity building for banks, NGOs andgovernment through community organizations (as resourcegovernment through community organizations (as resourcecentres) in remote areas to initiate and intensify thecentres) in remote areas to initiate and intensify the

linkageslinkages

Guidelines to sensitize insurance companies on providingGuidelines to sensitize insurance companies on providingpro-poor productspro-poor products

Strengthen the demand driven credit serviceStrengthen the demand driven credit service

Corpus creation for sustainabilityCorpus creation for sustainability


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Livelihood intermediationLivelihood intermediation

SHGs/Cooperatives with NREGAs to ensure employment toSHGs/Cooperatives with NREGAs to ensure employment to

the needythe needy

Financial allocation (grant) for potential assessment forFinancial allocation (grant) for potential assessment for

livelihood promotion in an area/location (SGSY)livelihood promotion in an area/location (SGSY)

Wage based permanent job and assets creationWage based permanent job and assets creation

Financial assistance for skill building and promotingFinancial assistance for skill building and promotingentrepreneurship through SHGs and Cooperativesentrepreneurship through SHGs and Cooperatives

Providing infrastructure to SHGs/Cooperatives forProviding infrastructure to SHGs/Cooperatives for

promoting local markets (shandy)promoting local markets (shandy)

Promote community managed storage facilities for betterPromote community managed storage facilities for better

marketing of the produces and goods (government canmarketing of the produces and goods (government canallocate, wherever it is possible and feasible)allocate, wherever it is possible and feasible)

Attention on building local economy vibrantAttention on building local economy vibrant


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Civic intermediationCivic intermediation

Positioning the SHGs to avail primary health care servicesPositioning the SHGs to avail primary health care servicesfrom PHCs and government hospitals (health card from PHCs and government hospitals (health card

Pondicherry), secondary and tertiary services throughPondicherry), secondary and tertiary services through

referralsreferrals

Grant support to SHG-federations/cooperatives for healthGrant support to SHG-federations/cooperatives for health

literacy among their membersliteracy among their membersExperiment running a few model primary schools byExperiment running a few model primary schools by

SHG-federations/cooperativesSHG-federations/cooperatives

Promote and strengthen the linkage with PRIs for inclusionPromote and strengthen the linkage with PRIs for inclusion

of poor in the development planning, implementation andof poor in the development planning, implementation and

monitoring process.monitoring process.Support for providing special care and services for the oldSupport for providing special care and services for the old

age and disabled through SHGs/cooperatives (there are aage and disabled through SHGs/cooperatives (there are a

few people initiatives)few people initiatives)


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Connecting Microfinance and MDGsConnecting Microfinance and MDGsfor further deepeningfor further deepening


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Thank youThank you

deepening micro finance chennai

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