US' Gutierrez gets lesson on India's micro-finance initiative

New Delhi, Feb 18 (UNI) When the US Commerce Secretary came visiting, along with meeting business CEOs he made a slight detour to acquaint himself with the lesser known but highly-successful micro finance lending endeavour that has spawned thousands of self-employed entrepreneurs in the country.

Taking out time from his packed schedule to get an overview of Indian micro-finance institutions and their contribution to self-help groups and individuals in rising from poverty, US Commerce Secretary Carlos Gutierrez availed the chance to learn about the key role that micro finance lending institutions were playing in poverty alleviation in India during his two-day visit here last week.

He praised the initiative of various players in lending micro finance credit in the country, saying other countries could learn from India's experience which was "impressive and truly inspiring".

Mr Gutierrez said, "by tapping into the human essence of entrepreneurship you have been truly empowering individuals. Many countries can learn from what you are doing." A visibly impressed Gutierrez met women who had benefitted from the microfinance credit system and set up handicraft enterprises, either individually or through self-help groups.

He spent some time admiring an array of decorative items on display at the venue. The encounter with various players in India's micro finance lending arose over an informal discussion at Dilli Haat on February 14 last.

Giving an overview of how the micro finance picture has played out in India, Mr Vivek Mahajan, chief of Basix, a non-government organisation (NGO) in the field of micro finance, told the US official of the growing incidence of urban poverty which now stood at 25 per cent -- on par with rural poverty.

Of the 200 million households in the country, roughly 50 million households were in urban cities. Altogether, 30 million households lived below the poverty line in India.

Pointing out that there was a downside to India's growth story, he said micro finance had provided the have-nots easy access to loans after banks had turned them down and the only recourse was the moneylending sharks.

Among the NGOs IndCare, Ujjivan and Sa-dhan were focusing on urban poverty. When these NGOs started, the urban poor were under served and had no institution to turn to for funds.

Sa-Dhan made a start by lending to small shopkeepers and traders.

The repayment risk was lower for these NGOs compared to banks, according to its head Mathew Titus.

Claiming as high as "95 per cent plus" repayment from its clients, Mr Mahajan said in the case of the nationalised banks, due to large-scale default on loans, branches of nationalised banks had become non-viable and its customers dissatisfied.

Credit for some of the repayment lay in the way the lending institution behaved with borrowers, he added.

For Reva Sood of IndCare, Delhi may have emerged as a hub of women entrepreneurs but the financial support was not available to them.

There was heavy demand for micro finance and the facility was soon expected to be available in 50 cities.

Both Mr Gutierrez and US Ambassador David Mulford, who had accompanied him, exhibited keen interest in the proceedings and asked searching questions from the participants. He asked about the number of borrowers and the rate of interest.

In the case of borrowers, the interest charged was between five and nine per cent, nine per cent for long term lending of three years and five per cent for one year.

There was one noteworthy difference between the urban and rural poor in that large majority of the urban poor were employed, of whom 30 per cent were self-employed.

According to a Ford Foundation official, so far it had focused on rural poverty alleviation, it was now looking to encouraging micro finance earnings as there was a huge unmet need.

US Ambassador David Mulford, who asked a pointed question on whether it was not easier to start unlimited bank branches to bring in huge sums of money in rural areas, got a categorical no in reply.

Bank branches did not necessarily translate into bank finances or access for the poor population, he was firmly told by Sa-Dhan head Mathew Titus.

By addressing the needs of the bottom end of the segment, Mr Titus said the access to micro finance had become so central to their upward mobility that it was being delivered at their doorstep! The Citibank official corroborated this view saying that as per records, commercial banks have not been successful in rural finance.

The need of the day was for low-cost micro finance institutions.

UNI