Microfinance Institutions In India: Transforming Lifestyle Of The Poor And Underprivileged
Some of the companies offering microfinance in the state of Andhra Pradesh have commercialized
the concept of microfinance, and stared acting as loan-sharks. But the recent troubles in a state considered as the microfinance hub have made it clear that the sector needs to grow in a more responsible and transparent manner. Muhammad Yunus, the Nobel laureate and Bangladeshi economist, emphasized on the need for a separate regulatory mechanism for the Indian microfinance sector, as their business model is completely different from the commercial banks and other lending bodies.However, there are many microfinance companies in India that work in a responsible and transparent manner to touch the lives of poor and underprivileged people. While some of the companies offer financial assistance of as small as $100 to poor borrowers, others offer financial assistance for non-commercial purposes. An increase is also noted in the number of rural and poor people taking loans from Microfinance India to meet their immediate monetary needs and repay the loan in affordable EMIs.
Indubai Kadam, a resident of Waghili, Maharashtra was in urgent need of money for her grandson Om's non-malignant throat tumor surgery. She borrowed the money from the Gouri Mahila Self Help Group based out of her village and the local money lender. But she repaid the high interest loans by borrowing money from the Sakhi Samudaya Kosh immediately. Now she has repaid the loan fully by paying Rs 2,000 per month. As per the recent statistics, most of the microfinance institutions concentrate on group and women-focused loan packages.
At the same time, Dukhimani Das, a housewife from Ghatakudi , Orissa doubled her household income by completing the 15 day training course conducted by the Industree Crafts in natural fiber crafts. She has contributed to her current household income of RS 3000, and increases the same to Rs 5800. Further, she was able to send her two children to school, and repay the loan in easy EMIs. Many experts advise the microfinance institutions to follow more flexible payment cycles to suit the nature and type of the borrowers. For instance, instead of collecting regular and smaller installments, the company can allow the rural borrowers to repay the loan at the end of the cropping season.
This types of companies in India are registered as non-profit organizations. But some of these companies deviated from the original business model, and pursued profits too aggressively. However, there are still many companies like milap that offer loans to the poor and underprivileged borrowers as a form of social service. The changing prospective of these companies has triggered the debate about real nature of the lending model. Certain microfinance companies
also follow a transparent lending model by allowing investors to choose the borrower.
The business website of these companies clearly displays the details of the borrowers including his name, age, occupation, location and needs. If a person is interested in providing financial assistance to the poor people, he can easily choose the borrower. The transparency is further making it easier for the microfinance institution to get the finance by avoiding the costly and high interest modes of finance. With passage of time, more and more Indian microfinance companies are expecting to adopt this transparent and responsible model of growth, and transform the lifestyles of a large section of the poor and underprivileged people.
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