User:Prof spgarg

Micro Finance: Opportunities Ahead in India
Prof S P Garg' Globally, Micro finance has been recognized  not only as a mere financial instrument but a powerful tool for development to address multiple dimensions of common people, particularly sustainable livelihood. Micro finance brings together communities of the unorganized sector and builds their social capital and networking. No other development instrument has generated so much enthusiasm and commitment in the recent past .Through innovation and creativity, microfinance takes care of an entire basket of services: micro savings, micro credit, micro insurance payment and remittance services, social security, health services and finally the capacity building in long run to improve the quality of life.

In South Asia, India and Bangladesh have demonstrated various successful micro finance models that have reached millions of common under privileged people through deepening engagements and participant’s faith, affirmative action and commitment. The 11th Five Year Plan has further stressed on Inclusive Growth and Financial Inclusion.

Who Are Financially Excluded And Whom To Serve :

Financially excluded from Credit ,Savings, Insurance Financial Services and  Advice  are basically heterogeneous group of people   such as Marginal farmers, Landless labourers, Oral lessees, Self employed and Unorganized sector enterprises, Urban slum dwellers, Migrants, Ethnic minorities and Socially excluded groups, Senior citizens and Women. Old people and physically challenged people. This is a large section of the society in rural as well urban area.

It is estimated that there are about 500-600 million unbanked or under banked people in the country .Let us realize that poor is bankable.

Various approaches have been adopted for micro finance such as : SHG & Bank Linkage Model ,Business Facilitator & Business Correspondent, MFIs, Involvement of NGOs and Community Development Organizations.

The micro finance sector in India has been on a tremendous growth path and this process continues. India would be the biggest Micro Finance Basket of the World.

Opportunities Ahead and Role of Management Education:

Micro finance sector with its twin objectives of national agenda of inclusive growth through Financial Inclusion and sustaining growth with quality is to address different interlinked issues with total integrated support of various stakeholders.

As a Business Opportunity Some of the challenges which can be converted by management graduates with their commitment into business opportunities would be : Appropriate and affordable Technology, reach and coverage, Appropriate and Efficient Delivery Mechanism ,developing  Sustainable  Business models ,Scaling up  and replicability of the activities, lowering transaction costs,  linking with mainstream activities , strong collaboration among Banks, Technical Service Provider,  and finally involvement of all. Micro credit plus There is a huge basket of services, such as micro-insurance, health, remittances, social security etc.along with value propositions to facilitate linkages. Develop Passion: Micro Finance friendly approach in totality and to look beyond today is needed. For of this sector ,development, capital, knowledge and opportunity are key inputs to empower the people.

Eye for Creativity and Innovation Creativity for product designs, channel configurations, cost cutting and technology usage and value creation would be important components of strategic planning. And here lies the role of Management education as a differentiating factor.

ICT as an Enabling Factor: For cost reduction, scalability and profitability, ICT interventions would enable to serve the masses at their door step. On cost structure the important work will be developing technology solutions, standardizing data quality and definitions, building client related bureau and linking it with existing MIS. This would require special attention.

Risk Mitigation Within the sector, different stakeholders have different roles. Each of these stakeholders possesses strengths and weaknesses that provide opportunity and threats. The major risks that are critical for the microfinance sector are management quality, corporate governance, and inappropriate regulation.

Proper understanding of Financial Products: Management Education can make to better understand how financial products and services may be provided cost-effectively, accounting systems, repayment cycles, and which programmes  work and which do not. Also Strong fundamental for finance related activities like savings, borrowings, utilization of  amounts, collection of installments, repayment  of loans and subsequent borrowings for additional purposes and sharing of profits  need to be inculcated.

Respect for Self Regulation and Transparency: Self regulation along with transparency of operations is important; least it would be susceptible to huge risk. Management education can further improvise the accounting standards and improving the code of conduct of micro finance institutions. And enhance public reporting Models like SMART racking (Specific, Measurable ,Achievable, Realistic, Timely Indicators) to be replicated. Encourage Financial literacy To empower the clients, the benefits of all components of micro finance activities programs need to be combined with financial literacy and other educational programs. Also encourage women empowerment and local leadership.

Develop market linkages Coordinate with marketing organizations, bodies for sale of the products developed/ produced by the beneficiaries. This would enable to strengthen the repayment culture, besides giving right price to them for their produce.

Evaluation of ongoing programs: While the focus of microfinance in India has been largely on growing outreach, a need is increasingly being felt to evaluate existing interventions for impact and analyze program designs rigorously Work in close coordination with Government and Regulators for effective understanding of Legal and Regulatory Environment.

Create Strong Sustainable Brand : Showcasing and replicating the impact of Microfinance activities is also equally important for strong branding. Also become a facilitator for encouraging 	reward and recognitions for the field staff.

Finally, Focus on Human Resources issues: This sector ,being in its infancy stage calls for a huge human capital at all levels to address the issues like Recruitment of right staff at different cadres, retention, continuous training and developing dedicated cadre, compensation, staff incentives schemes, to enhance performance and productivity are required to be addressed suitably. Creation of a positive mind set amongst staff would be on- going process. Suitable Training modules are to be developed. There are huge opportunities for MBAs to join the stream at various levels for a rewarding career proposition.

Ultimately, micro finance sector is a business proposition along with social commitment. The fragrance of success has already been felt. ………………….. Author can be approached at: spgarg@jimj.ac.in