Technology can bring sustainability
The poor were viewed as good borrowers until the mayhem occurred in AP, online which turned the sector topsy-turvy. The Joint Liability Group model was really successful in the sub-continent, ampoule but the crisis revealed that lack of regulatory framework could spell doom for the sector. It also brought to light yesterdays’ trivial topics as today’s significant ones and even questioned the entire business model. Under these circumstances, rx it is imperative to analyze the future challenges that loom large.
From the industry’s perspective, the MFI bill, which is expected to be tabled in the Parliament during the winter session, may prove to be the game changer. If passed, the bill could help in bringing the much-needed regulatory framework that could separate the wheat from the chaff. Also the sector may shrink in a bid to consolidate by using size as a bulwark. This could also avoid negative interferences into the sector based on pure political grounds. From the perspective of a customer, the challenge lies in utilizing the money with a proper plan of action that can result in the formation of an enterprise. During times of emergencies, the customer has her task cut out or if the customer invests the amount in agriculture or live stocks that are more risky propositions, then her repayment capacity will be questioned. So the challenge before the customer is to utilize the money with a proper plan of action that can result in the formation of an enterprise. From the Government’s perspective they should incentivize socially committed MFIs in the form of grants or subsidies and thereby helping them in raising the much-needed capital. At the same time, MFIs that violate the norms prescribed by the authorities should be dealt with accordingly. From a business perspective the challenge is to collect accurate data of the clients and keep them updated. Also it is important to understand the transformation that the client undergoes as part of the social oriented initiatives of the concerned MFI.
In short, technology is the one word that can thwart the aforementioned challenges. From the Industry’s perspective, technology plays a key role when the sector grows in size. With out proper technology, manipulation and fraudulent practices will be a never-ending affair. From the customer’s perspective, technology gives a clear picture of her debts and prevents her from falling in to the trap of over-indebtedness. It also helps in determining the impact of the transformation she has undergone due to ‘microfinance’. Government technological initiatives like Unique Identification Number (UID) can complement MFIs in deriving accurate data on the customers and avoid duplication / redundancy of data.
Under the current circumstances, it is clear that the success of the MFIs lies in their ability to lift people out of poverty, than sheer size or volume. For that technology has a definite role to play.