Cell phone use generates data – from basic call data records, to mobile money transactional data, to data from social media usage and so on -- that leaves what can be called a ‘digital footprint.’ The existence of this data is quite extraordinary for those of us interested in developing services for the poor and people with little or no formal financial access. In other words, it is available in a way that can be analyzed.
While microfinance products and lending methodologies vary significantly on the ground, two main features of microfinance have made this enormous expansion of access to finance possible: microlending has become scalable due to cost efficient operating models and due to risk management methodologies that ensured high repayment rates.
The most important and contentious issues about the IPO will take more time for us all to weigh carefully. It will be particularly important to see how the proceeds of several Mutual Benefit Trusts are used given the philanthropic purpose for which these MBTs were first created.
The Indian microfinance institution, SKS, became the second pure MFI globally to go public by listing its shares on the stock market. SKS is one of the largest microfinance institutions in the world with almost 6 million clients, mostly poor women living in rural areas.
We may prefer co-operative banks, which don’t make a lot of money for any one individual but do provide safe and accessible savings products to poor people. In spite of some notable exceptions, however, that’s not the dominant paradigm.
With an already nervous RBI (Reserve Bank of India) and Ministry of Finance wary of the path being charted out by the Indian MFIs and now SEBI (Securities and Exchange Board of India), the market regulator asking SKS unpleasant questions, it’s perhaps a time to pause and introspect.
Owing to its innovative program design and practices, microcredit reaches many poor people who lack access to formal finance. This is clearly a major gain that protects the poor and other disadvantaged groups from resorting to informal loans at extortionate rates.