Vijay Mahajan unveils wish list for Microfinance’s future

By Ayesha Dsouza

Microfinance Focus, Dec. 12, 2009: BASIX founder and Indian microfinance icon Mr Vijay Mahajan sees microfinance sector come out of its traditional role and venture out with many new products and expanding financial services to both women and men.

vijay mahajan Vijay Mahajan unveils wish list for Microfinances future
Vijay Mahajan, File Photo, © Microfinance Focus

In a keynote address at the Srijan Microfinance Summit in Mumbai recently, he insisted that by 2012 the financial inclusion should be achieved without giving any excuse. He was confident that the microfinance sector in India will achieve it with the help of technology, especially by introducing the mobile banking to cut down costs of operation in rural areas.
“ Our products are not innovative. The fact that people are grabbing them just shows how desperate they are,” he said and added that the microfinance institutions should use diffferent distribution channels that go beyond women’s groups.

On insurance products, he said the providers should go beyond just health and life insurance to provide a full suite of insurance products. “The poor need to be protected from many risks that they face; these risks have the potential to to wipe them out completely,” he remarked.

Foreign remittances, both domestic and international, should be made easier, he said referring to at least 40 million Indians who leave home to work but face several problems in sending money back to their families. The sector is working closely with Mr Nilekani to use the UID platform to develop a microfinance platform so that remittances can be authenticated, he noted.

On savings front, he said highly rated MFIs should be allowed to take savings from borrowers. “I’m willing to negotiate any level of safety with the RBI so that these services can be offered. This way, the financial system for the poor can be really revolutionized,” he added.

Outlining his vision for microfinance in India, he said every adult human being, not just household, should have a no-frills bank account (UID enabled) that is widely accessible. “Sub-K” (below 1,000 and also pun: sabke) transactions should happen without hassles.

“In 2012, we’ll have no excuse for not having universal financial inclusion. But financial inclusion is not the same as poverty alleviation. While inclusion will facilitate poverty alleviation, in order to eliminate poverty a more determined intervention is needed: we need to build skills, give entrepreneurs access to markets etc. which requires real institutional intervention,” he added.

On currency exchange issue that is being faced by many MFIs in the country, he said, “time has passed and now it is nothing but a Utopian idea. Markets are now so global that creating local economies is really not fruitful in the long run.”

Finally, he said it would be difficult to dramatically reduce transaction costs unless the MFIs eliminate the use of cash at the beginning and ending points. E-money will significantly reduce transaction costs, he remarked.

© 2009, Microfinance News. All rights reserved. 2008-09

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