by Chinq Yee Chong - Risks, South Asia, East Asia and Pacific, Trends/Challenges -

MICROCAPITAL.ORG STORY: Continuing Challenges To Expanding Microfinance In India – Criminal Activity And Danger Impede Microfinance Activities In India’s Naxal-Dominated Areas And Remote Tribal Groups In The Non-Cash Communities Of Jharkhand And Chhattisgarh Find Microcredit Unfamiliar

A recent report by Deepti Chaudhury on the Live Mint online financial news portal entitled ‘Crime, inaccessibility impede spread of microfinance activity’ [1] discusses the challenges faced by some MFIs that operate in certain regions in India including Bangalore, Uttar Pradesh and the remote areas in Jammu and Kashmir. The report talks about an interview with a potential microfinance client in Uttar Pradesh’s Bahraich town. The potential client has been unable to secure access to microcredit facilities despite being young and having the means to repay simply because he lives in an area where ‘even the MFIs don’t want to go because widespread poverty has made forming self-help groups difficult’. In addition, most people in the area work in a livelihood or sector that cannot be expanded.

The report goes on to make observations about MFIs in Jammu and Kashmir and the North-East of India where outreach is generally poor. The fact that ‘there aren’t any truly pan-India MFIs’ is telling. Microlenders are not keen to go to remote areas such as ‘parts of eastern Uttar Pradesh, West Bengal and Bihar, the hilly areas of Himachal Pradesh, the tribal areas of Jharkhand and Chhattisgarh, the more remote regions of Rajasthan and Orissa, apart from Punjab’, many citing the safety of their business and staff as a major concern. Hyderabad-based SKS Microfinance Ltd (SKS) [2], India’s largest MFI which is currently active in 19 of India’s 28 states, was reported to have said that ‘some areas are just too dangerous to operate in’.

In addition, Mr Suresh Gurumani, CEO of SKS, was quoted as stating that the economy in some of these remote areas ‘isn’t necessarily cash-based’. Mr Gurumani added that it is difficult to have microlending operations in the ‘tribal areas of Jharkhand and Chhattisgarh as these people have not seen cash’ and where ‘the only exchange they understand is barter of products’.

MFIs say that though they have been present in certain districts of Jharkhand, Chhattisgarh and West Bengal, Naxal-dominated areas such as Midnapore, Purulia and Bankura in West Bengal; Koderma, Latehar, Palamu and Gumla in Jharkhand; Bastar in Chhattisgarh; and Sundargarh in Orissa are now being seen as extremely risk-prone zones. Other areas are off limits because of criminal activity.

By Chinq Yee Chong, Research Assistant

Bibliography

[1] Article on the Live Mint online financial news portal entitled ‘Crime, inaccessibility impede spread of microfinance activity’: http://www.livemint.com/2009/10/19210620/Crime-inaccessibility-impede.html?h=B 

[2] SKS Microfinance Ltd: www.sksindia.com/ 

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