A long way to go

The article Micro magic in the July/August 2010 issue of India Business Law Journal was of great interest to me. As a Bihari, I feel there is a dire need for microfinance institutions in Bihar. There is poverty and promises to alleviate the problem, but very little money. Furthermore, many villages in Bihar do not know what microfinancing is and how it can benefit them. Ever since the establishment of Grameen Bank by Professor Mohammed Yunus, there has been debate over whether micro-credit is a sustainable way to alleviate poverty and its long-term consequences.

Whenever it is a question of a loan, the most important factor that comes into play is the credibility of the customer and collateral. Saija Finance has undoubtedly done a good job in Bihar, but the problem of finding capital to lend, as always, stares it hard in the face. The most important question is that this area is not properly regulated, which, in turn, means that there is no written word on how microfinance institutions should function. The entire controversy surrounding SKS Microfinance also raises questions about the intention and true goal of microfinance institutions – benefiting the poor or generating profits for themselves.

The proposed Micro Finance Bill, 2010, attempts to regulate microfinancing in India and at the same time makes provisions for women, including specifically making women eligible as clients and having women comprise two out of the six members in the council. One of the reasons microfinance institutions should deal largely with women is because they typically lack the social and economic assets owned by men.