The Hindu Business Line : IFMR research on micro-finance models with MIT

IN India, there are some 400 million people in nearly six million villages waiting for small loans. There is scope for lending Rs 45,000 crore to these people. Against this potential, only about 20 million have been served so far by the organised financial sector, with total disbursements of about Rs 3,900 crore.

One of the reasons for the big gap between the potential and reality is that there is not enough data for lenders, although there is empirical evidence to show that micro-finance is good business with low default rates.

To overcome this data shortfall, the Chennai-based Institute of Financial Management and Research (IFMR) has started two projects to research micro-financing models. The Massachusetts Institute of Technology (MIT) is partnering IFMR in one of them.

One project evaluates the impact of a micro-finance programme of Spandana, one of the faster-growing micro-finance institutions in India, based in Hyderabad. This programme is being done in collaboration with the Poverty Action Lab of MIT.

The other project, in Orissa, tries to evaluate the impact of providing micro-finance only for the purpose of buying smoke-free chulas to replace smoky ones at homes. The IFMR's Centre for Micro-Finance Research is indeed "exploring collaborations" for a number of research projects, says Mr R. Kannan, Director, IFMR.

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