“Microfinance is not a charity, it is a business.” – OM Economic Development Unit

Microfinance Focus, July 21, 2010: Operation Mobilisation (OM) is an international Christian organization that has in recent years adopted microfinance as part of their work, under their Economic Development (ED) Unit. OM is headquartered in Secunderabad, with its South India Head office located in Bangalore and the North India Head office located in Lucknow. It employs over 2,000 workers all across India. Its other services include their 103 Good Shepherd Medium English Schools nationwide that aim to empower Dalit children through good education.

Clients of Operation Mobilisation

In his speech at the opening of the tailoring institute on Thursday, 15 July, OM representative Jayan George spoke on the genesis of the idea. Through their interaction with the children of their Good Shepherd School in Kannur, they noted that many mothers often lamented about their inability to pay for their children’s education. This prompted the leadership to think of new ways to help these women earn income for themselves, as the men of these families often spent their income on gambling and alcohol. “When we commit ourselves to improving the lives of these children,” Mr George said, “we are involved not only in their education but we also want to see the community being empowered. Over the years, we’ve seen that if you are able to empower the women, the whole family can be empowered.” As tailoring is a relatively easy skill to pick up, and as it has the potential to help a woman earn a steady stream of income, ED decided to launch this vocational institute in Kannur, Bangalore. The institute already has 15 women signed up under this programme.

The head of ED, Mathews Abraham, speaks to Microfinance Focus about the microfinance activities under the young but influential Economic Development Unit of OM India.

Microfinance Focus: What comprises of the Economic Development Unit under OM?

Mathews Abraham: There are 3 programmes under ED. One, we help to set-up and manage SHGs. The second programme involves equipping people with practical skills through our vocational training centres, so that they may be able to make a living for themselves. We also give out income-generating loans for the purchase of livestock, for agriculture, or to set up small-scale businesses such as a petty shop. We are still pretty new to the scene, but already we have begun to impact some of the poorest parts of Karnataka.  India really needs microfinance. There is rampant unemployment everywhere and microfinance can really help people to develop economically.

Microfinance Focus: Being relatively new to the scene, how does ED manage to balance its books?

Mathews Abraham:  We currently charge only a 1% flat interest rate to our borrowers. Many MFIs charge much higher interest rates, but we don’t want to burden our clients, as much as is possible. Even at a rate of 1%, we are on the green side. The key to maintaining a microfinance business lies in choosing your clients wisely. For us, the basic criteria are that the borrower has a good work ethic and attitude, such as not idling around or indulging in bad habits like alcoholism and drug-taking. The borrower has the ability to maintain his/her business. For example, if someone asks for a loan to buy a buffalo, we will ensure that the borrower has space to keep the buffalo. In such a case, it means that he/she cannot be staying in a flat where there is no space for the animal. There are no critically ill members in the family, which is a situation that may compromise the borrower’s ability to repay. We once had a case where we lent some money to a borrower to purchase an auto, but midway through, a family member fell sick and he was unable to repay the money.

My aim is for ED to be self-sustaining. I should be able to pay the salary of all the officers and staff from the business alone, without compromising our commitment to the clients. Our current repayment rate of 99% is crucial to achieving this aim, that’s why it’s so important to get people to repay.

Microfinance Focus: Would you then agree with critics who say that microfinance cannot help the ultra-poor?

Mathews Abraham: Microfinance is not a charity; we are a business, so we need to take steps to ensure that our borrowers can repay the amount. We want to help the poor, but at the same time we also need to manage our business in such a way that it can sustainable, and help even more people.

However, in my opinion it is not impossible for microfinance to help the ultra-poor. Recently I’d visited one of the poorest slums of Bangalore, where we are about to launch an SHG of 75 women. So I met a pastor there who told us that there was a woman in the slum who was trained by us who wanted to start a tailoring training centre, and she wanted to take some loans to purchase a tailoring machine. So we gave, and we believe that she has the ability to repay the loan in full.

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