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Foreign banks' active interest

THE `GROWTH and equity'-led Union budget 2005-06 mentions a `resurgent rural India,' which should go some way in giving a fillip to the rural economy. Among the various measures announced is one relating to rural micro credit. This could not have come at a more appropriate time; The United Nations has designated 2005 as the International Year of Microcredit. Effective rural microfinance can very well be the elusive panacea to a host of social and emotive issues ranging from rural employment to empowerment.

"Microfinance is a powerful tool for reducing poverty as it makes capital available to the unbanked poor at reasonable rates. Our survey of 200 clients has shown that 58 per cent of those who have used microfinance for about four years, experienced a significant reduction in poverty and 41 per cent have come right out of it,'' said Moumita Sen Sarma, Head of Microfinance operations at ABN AMRO Bank which is among the few foreign banks actively involved in microfinance in India. Citi Bank is another foreign bank that offers large amounts of microfinance. HSBC is a new entrant here.

Microfinance initiatives began seriously in India almost three decades ago largely through non-government initiatives with the setting up of Shri Mahila SEWA (Self Employed Women's Association) Sahakari Bank in 1974 for providing banking services to poor women employed in the unorganised sector in Ahmedabad. Later, the National Bank of Agriculture and Rural Development (NABARD) played an important role in bringing together banks, various self help groups promoted by NGOs and the micro finance institutions (MFIs). Today, NABARD, the Small Industries Development Bank of India, which established the SIDBI Foundation for Microcredit (SFMC), and a clutch of commercial banks, regional rural banks and co-operative banks are active in the sector reaching out to millions of the rural poor, mainly women. Banks and other lending institutions find microfinance an attractive business opportunity. Even though the ticket sizes are low credit recoveries are quite high.

"ABN AMRO has established credit lines of nearly Rs. 35 crores to 11 MFIs reaching out to nearly 75,000 poor households in six States and expects to end the current fiscal at Rs. 32 crores outstanding with the MFIs,'' said Moumita Sen Sarma.

Pilot study

ABN AMRO for instance did a pilot study with Cashpor Micro-Credit, one of its partner MFIs in Uttar Pradesh and Bihar, on the use of "Simputer", a hand-held computer for real time capture of data on-field for use by field workers in remote villages.

Considering the success, the bank is now providing Cashpor with enough Simputers to cover an entire district reaching out to thousands of its members, for enhancing efficiency in the delivery of credit and other services to the rural poor.

HSBC's foray into micro-finance is unique in itself given that it is the first bank to focus its lending on schools serving children from low-income families. It has partnered with the Centre for British Teachers (CfBT), a not-for-profit education resource management organisation that supports schools, trains teachers and assists in bringing about educational improvement.

"Our partnership with CfBT to reach out to the children of low-income families in Hyderabad and Chennai is aimed at just that,'' said Malini Thadani, senior vice-president, Group Public Affairs, HSBC India.

Whether microfinance will really deliver what it is capable of will depend on government help in the form of regulatory support as on the motivation and willingness of the large army of field workers employed by different agencies.

Oommen A. Ninan in Mumbai

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