NEWS WIRE: India: Microfinance Sector Predicted to Total $2b By 2009

Source: The Economic Times.

Original article available here.

GURGAON, INDIA, January 28 – Laxmi, 40, a single mother of two teenagers runs a roadside pottery shop in Palluruthy in Kerala, and that’s all she has to support her family. However, over a year ago after her husband’s death, Laxmi’s life was in a shambles until she took a loan of INR 6,000 (USD 150) from SKS Microfinance to start this business.

She’s among millions of others in India who have benefited from the microfinance wave. Till a couple of years ago, it was just another non-profit mechanism for social change, dominated by NGOs and donor-driven organisations or limited to a few experiments in spurring consumption in rural markets.

Lately, however, investments in microfinance have been on the rise due to the involvement of the capital market and private sector investors. And we have the big daddies of banking such as Deutsche Bank, ICICI Bank and Citibank entering this segment as well.

Not surprisingly, microfinance is fast emerging as a hot opportunity for global players with an estimated USD 20 billion to be invested globally and around USD 3 billion in India, by 2010. The volume of total microfinance loans globally rose from USD 4 billion in 2001 to around USD 25 billion in 2006, according to a research recently conducted by Deutsche Bank.

“About 51% of the total borrowers belong to South Asia,” says Raimar Dieckmann of Deutsche Bank in the report. Meanwhile a research conducted by Hyderabad-based Intellecap, a strategic services firm in the international development sector, states that the growth of microfinance institutions (MFIs) in India would be even faster than anywhere in the world in the years to come.

India has seen many MFIs entering the market and those present are growing at a fast clip though none of them have yet reached the level of the better known MFIs in Bangladesh such as Grameen Bank and ASA. Nevertheless, Indian MFIs have penetrated rural areas and successfully helped poor women. One of them is Varanasi-based Cashpor Microcredit. This MFI delivers its services only to below poverty line (BPL) women in Uttar Pradesh and Bihar.

Headquartered in Malaysia, Cashpor aims to reduce poverty in the Asian region by providing technical assistance to scale up existing credit and saving programmes. “We are growing at 100% despite the fact that our clients are poor illiterate women in professions like farming and animal husbandry,” says Cashpor’s AGM Durgeshwar Mishra.

Manju Mery George, associate VP of Intellecap, says, “In 2002 the market share of MFIs in small credit was 28%. That has grown to 47% in 2007.” There are about 800 to 1,000 MFIs in India of which Intellecap had included about 60 in its research.

“The 60 MFIs that were identified are the main ones in India and constitute to about 90 to 95% of the total business in this segment,” says George. However, lately there are some trends, which also favour growth of MFIs in India. “The word micro is re-defined with the average size of loans increasing from USD 161 to USD 201. And in India MFIs are now moving from the south towards the north and north east,” he adds.

Similar Posts: