The formal banking system’s penetration in north-eastern India is quite poor, according to a study by the apex body of micro-finance institutions, Sa-Dhan. The region consists of Sikkim, Arunachal Pradesh, Assam, Nagaland, Manipur, Mizoram, Tripura and Meghalaya.
Though financial Markets do exist in the region, it is characterised by small and frequent requirement and is segmented, particularly in the hills. Majority of the formal credit flows as personal loans to urban customers, largely comprising government employees and professionals. Within this group, the smaller size financial needs are the most neglected regarding institutional credit, the study says.
However, the region is rich in traditional institutions of financing, which mainly function on the basis of social bonding. Interestingly, women in this region are economically more active compared with the rest of the country.
The study noted how traditional credit institutions, like Marup in Manipur, evolved itself in different ways to survive. Similar traditional credit systems exist among readymade garment traders of Jorhat district in Assam and in the form of Village Development Boards in Nagaland, Kebang in Arunachal Pradesh and Assam, Dorbars of Khasi and Jaintia hills in Meghalaya, Dong Committees of Bodos and Namghar Committee in Assam
The study, making a plea for the development of the region said, “the (MFI) industry can go forward and be able to service 1.5 million clients. With a demand for Rs 26bn microfinance services for the region, this could be easily possible.’’