The Hindu Business Line : Microfinance meet focuses on organising credit flow to SHGs

A day-long national seminar on microfinance discussed the role of banks and financial institutions as business facilitators and business correspondents.

Organised by the International Network of Alternative financial institutions (INAFI), the seminar focused on linking SHGs with institutions to organise credit flow.

Mr A.K. Garg, Managing Director of Agricultural Finance Corporation Ltd, said that non-financial services were as important as financial services, adding that the business correspondent model would decrease transaction costs.

Under RBI recommendations, the business facilitator will provide non-financial services and the business correspondent will provide financial support services to rural and farm sectors.

In the business correspondent model, institutional agents and other external entities can offer services such as disbursal of small value credit and recovery of principal or collection of interest, and sale of micro-insurance, mutual fund products and pension products.

Quality concerns about credit lending such as declining payments and exclusion of the needy from micro finance schemes were raised.

Panel members discussed the need for a standard rate of interest, optimising cost of intermediation (that microfinance institutions charge for servicing), and a concept of security of savings.

Mr M.P. Vasimalai, Executive Director of DHAN Foundation and Chairperson of INAFI India, said that banks must move from the current term lending scheme to a regulated cash credit system for microfinance.

Mr R Balakrishnan, Executive Director of Nabard, said that information communication technologies should be used to reach out to the poor. He also spoke of the need for cross-SHG producer groups.

The seminar also discussed aspects such as affordability of microfinance and addressing indebtedness of the poor through debt swap.

INAFI is a global network of development organisations active in support of savings and credit programmes that lead to poverty reduction at all levels.

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