Poverty and Microfinance
Government data recently released by the Planning Commission Deputy Chairman, rx Montek Singh Ahluwalia, sickness clearly shows that the number of poor in the country has come down, whatever be the method of calculation adopted. According to the report, the poverty ratio has come down from 37.2 % (2004-05) to 29.8% (2009-10). As a practitioner of microfinance, I feel that the sector is slowly but steadily attaining its goals. The studies mentioned below underscore my belief.
A study conducted by a group of researchers on behalf of 'RuMe' compared the wealth and assets of households enrolled for microfinance program in 2004 and later in 2009. The study covered 495 households and found that 71% of households, who were earlier Below Poverty Line, had increased their assets. For 7% there was no change in the financial position and the remaining could not come out of poverty due to heavy lifecycle expenses. Another impact study covering 878 households across 63 SHGs in Karnataka and Tamil Nadu concluded that formally run financial services had its limitations in extending services to the poor. The study mentioned that, arrival of microfinance in fact reduced the interest charged by moneylenders and demanded more flexibility in their business dealings. This was another indirect way in which microfinance met the livelihood needs of the poor. Likewise, PPI report of ESAF shows that 68% of new clients are below $2/day while only 63% of existing clients are below that level.
Apart from private MFIs, Government oriented initiatives like Kudumbasree (Kerala), Mahalir Thitam (Tamil Nadu) and Velugu (Andhra Pradesh) have also played a crucial part in alleviating poverty in the respective States. Social oriented Government initiatives like MGNREGS (Mahatma Gandhi National Rural Employment Guarantee Scheme) and NPS (National Pension Scheme) should not be forgotten.
The stories from the field also reflect the same point. Sujatha Shwere, an ESAF member in Nagpur was literally earning nothing before joining ESAF. Now she makes a profit of Rs.10,000/ month by producing and selling vermicellies.
All said and done, India's microfinance market is still the least served market in the world. The current annual microcredit demand in the country is estimated at about 22 billion from 245 million low income families. But the supply was only about 7 billion (as per 2009 figures). This shows that microfinance has an even bigger role to play in alleviating the biggest malice of a developing nation – poverty.