What do they do?
He would have been a hardcore banker had he not branched out to microfinance. And that was because “it is a business with a social mission offering double bottom line satisfaction to all stakeholders”. Reykam Jayasurya, an MBA and LLM, started his career in 1982 in the State Bank of India before moving to the Small Industries Development Bank of India (SIDBI) in 1991. In 2003 he became a microfinance expert and consultant and is at present the CEO of Asmitha Microfin Limited, a leading microfinance institution, drawing a pay package, which in his own words is “competitive and comparable to the banking industry”.
“Microfinance,” to Jayasurya “means provision of financial services to the low income group which lacks access to such services.” “It offers small loans for various purposes, predominantly income-generation activities, as well as other financial services such as savings, insurance, remittances etc.” The loan amounts are repaid over one year, in small weekly, fortnightly or monthly installments.
The evolution of micro finance in India can be broadly divided into four distinct phases: The cooperative movement (1900-1960), subsidised social banking (1960-1990), self help group (SHG) - bank linkage programme and growth of NGO-MFIs (1990-2000) and commercialisation of microfinance.
During the first phase, credit cooperatives were the vehicles to extend subsidised credit to villagers under various government-sponsored programmes. In the second phase the government focused on measures such as nationalisation of banks, expansion of rural branch networks, establishment of Regional Rural Banks (RRBs) and the setting up of apex institutions such as the National Bank for Agriculture and Rural Development (NABARD). But the banks, points out Jayasurya, were not forthcoming when it came to offering loans to low-income borrowers with little or no cash income.
The failure of subsidised social banking triggered a paradigm shift in delivery of rural credit with NABARD initiating the SHG - Bank Linkage Programme (SBLP), aiming to link informal women’s groups to formal banks. During the same period another apex level institution, SIDBI, formed in 1990, initiated the Mahila Udyam Nidhi, a project to empower women with access to micro credit through NGOs. These initiatives generated a lot of interest among newly emerging microfinance institutions (MFIs), largely of non-profit origin, to collaborate with NABARD and SIDBI.
In the current phase where the banks are taking increasing interest in the rural sector the “NGO-MFIs have begun to transform themselves into more regulated legal entities such as NBFCs to attract commercial investment to meet the huge demand for microfinance services,” points out Jayasurya.
The potential of the Indian microfinance sector is enormous. “On a conservative estimate, 100 million households need micro-credit and other financial services which are not available to them,” says Udaia Kumar, MD Share Microfin Limited, an MFI. “In the last two decades, the MFIs have grown phenomenally but they could hardly reach around 15 per cent of potential clients,” he says. Therefore, there is enough scope for this sector in India to grow horizontally and vertically. Agrees Atul Takle, executive vice president, corporate communications, SKS Microfinance Ltd. “The microfinance sector is in its initial stage and is growing rapidly. Thus, it has immense job and career opportunities.” The sector, Kumar says, needs personnel from various educational and experience backgrounds to serve in an organisation at various levels such as operations, finance, human resources, internal audit, and corporate communications.
