I do not want to sound very skeptical about the whole Micro-finance revolution for, they actually reach the populations, no one ever tried before. Though MFIs are very lucky too as there are no regulations (leave the word 'strict') to guide them still.
So, my hypothesis today is, if most of the MFI heads are sophisticated businessmen. I know most of you will right away say "yes" and now I want to counter you, but I am sorry even I say yes. This blog entry is essentially for those who believe in using new jargons like "social entrepreneurs" etc even when they understand these people are just doing business. I discuss below why it is wrong to attach the word "social" with MFIs. There by proving the above hypothesis.
MFI do not provide any service free of cost, includes even the cost of, say 5 Rs meeting register, under documentation cost or some other innovative head. They provide insurance, so that their loan is covered. If client is getting some money out of a mis-happening and is unable to pay further installments, do you think the MFI will leave the client jlt when they can leverage on the fact that it is because of them the client has insurance. And this is for the cases when the insurance is for clients. I am sure some of the MFIs will be having this loan insurance product too, where their loan amount is secure, they will add it to some other flashy scheme and sell it to clients.
If you are social, give the insurance premium from your pocket, you know the premiums range from 2 to 4 % of loan amount only at maxx. If you want better schemes, please lobby! (you have all my support).
Other reason, for Mf being a typical business is the multiple loan issue. Since people get a lot sentimental over this issue, let me tell I am not against multiple loans - not at all. But then I also do not attach a huge social value to Mf either. It is like a person having more than one mobile sims, It is their perspective completely to have just one or more than one. I will be enticed if Airtel and Reliance come to me with new connections and ask very little identification. I will certainly add those two to my existing BSNL connection. My financial burden will obviously increase though. But neither Airtel nor Reliance will be bothered, they just got one more customer.
If you are social, don't give credit to those who already have two loans. There is something called credit absorption capacity you know, which poor people from urban and rural areas do not know.
There is nothing wrong with being profit oriented, with the amount of private money now coming in (you need to return money with profits higher than other industry). I know it will be very insane if I talk about the high interest rates here. But I will be very happy to learn about an MFI, which created, funds for its clients or which shared some of the profits with existing clients or an MFI, which has this education program for its client's kids.
If MFIs are doing the above things, that'll be very good. I know they'll be doing this very soon as it will surely help in client retention and new client attraction - both very important in the light of competition.
So, when do I call you social?
Have you ever thought of calling TATA's social because of their CSR activities?
I can call you social entrepreneur for sure, for sometime, if you can come up with models that are suitable to places like Southern MP, models that help solving debt traps, models that prevent suicides!
1. please feel free to counter/support argument. If you are hurt I express my deep apologies.
2. I remember using jlt somewhere. jlt - just like that
3. I am actually very serious about the issue I just discussed, though there are few statements where you'd probably smile. Its like taking salt with a pinch of sugar
4. The reason for too many NBs is that writings look very stylish with more no. of these, like footnotes/endnotes in word documents.
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