Micro-Finance movement has really taken off in South Asia. According to a recent World Bank report, microfinance today meets around 15 per cent of the overall credit requirements of low-income families. Bangladesh and Sri Lanka are leading the movement, while India falls under medium coverage category.
The report, ‘Microfinance in South Asia - towards financial inclusion for the poor’, notes that microfinance today reaches at least 35 million households in the region. However, the penetration and outreach of the sector varies greatly across the region.
The report classifies the six South Asian countries into high, medium and low coverage levels. Leading this movement are Bangladesh and Sri Lanka, where more than 60 per cent of the poor are served by this sector. Nepal and India (increasingly) fall in the medium coverage category, while Pakistan and Afghanistan have been classified as low-coverage countries.
Both countries with high levels of coverage have devised unique methods of making microfinance available to the poor. While in Bangladesh, the coverage is based on the programmes of a few specialised institutions, in Sri Lanka the high outreach is largely based on an extensive network of Community Based Organisations (CBOs), which receive substantial government subsidies.
In India, the recent spurt in microfinance activity can be attributed to the growth of self-help groups (SHGs) as well as non-governmental organisations and microfinance institutions. This, however, remains largely concentrated in the southern states.
According to Mathew Titus, executive director of Sa-dhan, while such World Bank reports are useful, they do not necessarily reveal the entire picture. For instance, while it is true that India is at a medium coverage level, we cannot ignore the fact that the microfinance sector here is driven by commercial borrowings unlike other countries where World Bank subsidised multilateral institutions dominate the sector.
“The Reserve Bank of India and the government have taken steps to develop this activity for the poor. It has been given a ‘priority sector’ status by the RBI, which makes it important for banks to lend to the sector. Further, community based institutions are pre-dominant here as well. The SHG-bank linkage gets aggregated at the community level,” adds Titus.
The report says that South Asia has every conceivable kind of microfinance activity. “Women form the majority client-base for microfinance in the region and the activity focuses on women even in societies like Afghanistan,” claims the report.