Responsible Lending: A New Industry Benchmark? (P.N. Vasudevan)

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From left: William Tucker, P.N. Vasudevan, Royston Braganza, John Conroy

Microfinance Focus, October 15, 2010 (Colombo) : Moderator of the session, William Tucker, added on to the points by John and the audience  before introducing the next speaker. “Ultimately competition will drive down interest rates. We have seen declining interest rate because of enhanced competition in countries like Cambodia. Right now, we are receiving negative reports about high interest rates. Now Sri Lanka is also considering interest rate caps. Before I introduce Vasu, let us soften up with a video.”

Video Summary: “Presenting to you our proud customers of Equitas, rooted in fairness, transparency and efficiency.”

-          Equitas BPO (Business Processes Outsourcing).

-          Spectacles given free

-          Health help line introduced.

-          MF Plus Card to purchase food and make savings for security in emergencies

-          Equitas is focused on enhancing skill levels and creating more livelihood options.

-          Linking farmers directly to vegetable clients

-          Supporting clients children in school and after school programmes

-          2235 disabled clients funded.

-          To re-habitat 100 families that lay on the streets to realise their dreams.

P.N. Vasudevan, Founder and Managing Director of Equitas, India-based microfinance institute began with a light note on microfinance (MF), “We can do wonderful things through MF. Markets are extremely imperfect today but I do wonder if any markets can be close to perfect at all. We are far from perfect, so there needs to be restraints on our side in dealing with clients. Responsible lending is not just from the perspective of clients but other stakeholders. We have worked towards a reputed Board and strong Board activities. Equitas has achieved a governmental level 3 rating. We are the 1st MFI in India to get a government rating and the 8th company in the country. To us, one of the ways of lending responsibly means we have all inclusive interest rates published as well as insurance admin published.

We also have voluntary caps on Return on Equity (ROE) & Managing Director’s salary (cap on how much management can be paid). An MD’s salary is based on the salary of lowest paid staff in the company. Let’s say I get 40 times the salary of the lowest paid staff. As a director, I thought I’d have 10% increment in salary every year. But my assistant reminded me that there is always new staff coming in so since my salary is based on the lowest paid staff, I think I am the lowest paid MFI director in the country.

Cap on the ROE is not enough as John Conroy has mentioned. You have to have an integrated ecosystem of services – microfinance gives a wonderful platform to carry our other non-financial services for the poor (mentioned in the video). Even the government cannot reach them as far as we MFIs can. So we are in an extremely good position to help the poor. Our non-financial services should be done for consumption by the poor and not be for profit purposes.

We also work on training & certification as well as motivation schemes for employees. Small stuff should be done to show that the organisation cares.

I will end with a story.

Two separate couples went to forest for a walk. In both cases, husband and wife got separated. The husbands happen to bump into each other and one asked the other, “what are u doing?” “Searching for my wife”. “Okay, let’s each describe our wives so that if l find her, I will give you a shout.” Then, after both men have described their wives, the first man said to the second man, “okay, let’s both search for your wife.”


I think that for each leader, Microfinance began with novel thoughts. However, when MFIs see a new model, a money-making model, they change to that model.

I will say, be true to your wife and true to your model.

Speakers Snapshot:

William Tucker is the Executive Director of SEEP Network, founded in 1985 and based in USA. He has over 30 years of microfinance experience and has worked in over 40 developing countries. The Small Enterprise Education and Promotion (SEEP) Network connects microenterprise practitioners from around the world to share practical experience, develop practical guidance and tools, build capacity, and help set standards to improve microenterprise development practices.

P.N. Vasudevan, Founder and Managing Director of Equitas based out of Chennai, India. Previously he was responsible for the retail banking including retail liabilities, branch banking, retail assets and alternate channels and managing a branch network of 72 branches spread largely over Maharashtra, Gujarat and North India.

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