Date: 24th November, 2006
MICROFINANCE:
Talk by Mr. Kishore Kumar,
Sr. Vice President, Corporate Banking, HDFC Bank India Ltd.
It was a rare occurrence when one of the most experienced individuals in the field of banking management, shared his real time experience with the budding managers of Amrita School of Business. Microfinance with its multidimensional make-up is developing into one of the major areas in the field of banking sector. With strong regulations by RBI, increased emphasis on CSR (Corporate Social Responsibility) and growth prospects and economic depth in the rural market, microfinance is all set to create a new facet to the BFSI sector. The conceptual change in thought process of the people in the bottom of the pyramid, increasing awareness of credit policies, changing lifestyle etc. increases the need of credit in the rural arena.
“Rural India is poor in money, but rich in values and truth.” Mr. Kishore Kurmar started his presentation by properly aligning these words with the veritable concept of microfinance. He emphasised on the importance of microfinance for the Indian economy, societal development and overall sustainable growth. The role of money lenders in the rural market was analysed and assessed with a very clear view. According to him the role of money lenders in the market is indispensable. “Any time money at your doorsteps with minimum paper works.” This makes money lenders more acceptable even though the interest rates (in an annual basis) charged by them is as high as 300 to 400%. The core challenge faced by a financial institution entering the rural arena will be matching these expectations of the rural poor. He also scanned through the recent initiatives by the RBI for including money lenders for rural development and empowerment. This was a major move in the field of micro finance, as it does not remove an existing layer, but empowers them to do clear and ethical business.
“The interest shown by many foreign players for delivering services to this section emphasises the economic viability of this particular sector in BFSI.” He added. The dilemma in the minds of the students about the career prospects in microfinance was completely erased as he explained the future of this field. “The concept of the nobel price winning ‘Grameen bank’ in Bangladesh became a success because they focussed on the prospects and narrowed down the problems with constant monitoring. The field of microfinance is not yet in the refined form. Hence every initiative should be perfectly monitored so as to eliminate the chances of moral hazard.”, He reiterated.
He anticipates that the next cycle of change in Indian consumer markets will be the arrival of foreign players in microfinance. This will change the entire picture of the industry. The sector will witness increased competition, increased credit needs, budding of new models for credit dispersal and strict regulations from the part of RBI. Emerging from decades of economic isolationism, India’s reform process is now bringing this billion-person economy into the global arena.
Yes! Most of India’s growth is in the future, not the past. The main reason for this is the changing economic-social structure and make up. Collectively, we have only begun to graze the surface of what is the biggest potential market opportunity in the history of business. To put it in simple words, the strata down the pyramid of economic well being represents a vital element in our surge towards achieving developmental goals.
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