MICROCAPITAL STORY: Annual Policy Conference on Indian Microfinance Held in New Delhi

The Annual Policy Conference on Indian Microfinance, organized by Sa-Dhan, the Association of Community Development Finance Institutions, and the Minister of State for Finance of the Government of India was held this past April 2nd-3rd in New Delhi.

Sa-Dhan is a network of India-wide microfinance institutions providing financial services to low income households in both rural and urban areas. Founded in 1999 to improve the policy and operational context of microfinance in India, Sa-Dhan currently has 162 members with a collective outreach of 7 million clients.

The conference focused on current challenges in the Indian microfinance sector including poverty and financial inclusion, improving efficiency through the use of technology, regional expansion, microinsurance, and the role of community-based organizations. Also included in the discussion was debate over the Micro Financial Sector Bill-2007.

The Micro Financial Sector Bill was proposed on March 20th 2007, with the intention of promoting the development and growth of the microfinance sector in rural and urban areas of India. The Bill presents a structure for providing an enabling environment to ensure access of financial services to the poor, and especially to poor women.

Discussion covered the current structure and overall characteristics of the Indian microfinance sector and how outreach would be maintained while debt was kept under control as institutions grew and attained larger scales.

Government officials from the Ministry of Finance expressed concern over the accessibility of microfinance services to the poor, pointing out that only 27 percent of the rural population had formal access to credit, and suggested a cap on microfinance interest rates to alleviate this problem.

Dr. Raghuvansh Prasad Singh, Chairman of the conference, stated that generating employment in rural areas and discouraging distress migration to cities was the key to poverty reduction. The facilitation of self-employment through vocational training and self-help groups was suggested.

It was noted that while only 25 percent of the140 million poor in India had access to financial services, microinsurance reached less than eleven percent of the poor. Greater access to insurance was emphasized.

The overall goal of the conference was to streamline India’s mircrofinance infrastructure, facilitating sustainability to support the Indian microfinance sector’s current rate of growth and provide for future growth rates.

By Melissa Duscha

Additional Resources:

India Infoline News Service: Annual Policy Conference on Microfinance

Micro Financial Sector Bill-2007

MIX Market Profile for Sa-Dhan

Sa-Dhan, the Association of Community Development Finance Institutions

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