The Hindu Business Line : ABN Amro deepens micro-finance exposure

The Dutch banking major is focusing on micro-finance enterprise development in India. "We are building the capacity of seven MFIs spread over Assam, Bihar and Uttar Pradesh. We hope to build capacities of around 50 start-up MFIs over the next three years," said Ms Moumita Sen Sarma, Head-Microfinance, ABN Amro Bank (India).

Since 75 per cent of the micro-finance activity is concentrated in four southern States, the bank is looking at the north and northeastern States to develop this programme.

ABN Amro had set up a foundation in Amsterdam to focus on global poverty alleviation in 2005, which invests 5 million every year on projects focused on helping communities and individuals create sustainable livelihoods to improve their standard of living. This foundation has committed 30 per cent of its funds to ABN Amro Foundation India set up earlier this year for projects in India.

As part of the initiative of developing micro-finance enterprise in the country, the bank identifies NGOs and provides them training, management and information systems as well as an 18-month business plan. "The idea is to deepen our existing exposure in micro-finance. For capacity building, we are also looking at NGOs, which already work in the area of health, education, environment conservation and are looking at introducing micro-finance to address local needs," said Ms Sen Sarma.

ABN Amro has an outstanding micro-finance loan portfolio of around Rs 170 crore. The average size of loans is about Rs 6,000.

"We have around 4 lakh borrowers and hope to expand that to around 10 lakh by 2009. The bank has partnered with around 27 MFIs and we plan to add 15 more this year," she said.

In the area of environment conservation, the bank is working in the Melghat Tiger Reserve for rehabilitating displaced tribals. "We plan to expand the rehabilitation work beyond the three villages we are currently working with in the Melghat area. Together with our project partners, BASIX, we are designing `livelihood projects' - a package of activities for these tribals- which will help them survive and in turn bring about regeneration of the forests," she said.

ABN Amro operates through an MFI partnership model to disburse loans. Some of the major MFIs the bank has tie-up with include BASIX, SKS Micro Finance, CASHPOR, Bandhan, among others. While the bank lends at an average of 10 per cent, most of the MFIs price their loans at 24-28 per cent.

"The operating cost of MFIs can come down by using technology. Increasing the scale will help drive down operating costs — for instance, the operating costs of old and stable MFIs is around 8 per cent while that of the new ones is about 20 per cent," she said.

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