Microfinance

Whatever happened to Microfinance?

By Tensing Rodrigues

I had to quit this space after a brief appearance in Sep 2010 on account of some personal preoccupations. But returning to it now, I find microfinance is not the same; a lot has happened in the meantime. My personal feeling is, not really much has happened. But the perceptions have changed a lot. And in the wide world of human affairs perceptions matter much more than reality. Without being too philosophical, that is the reality : microfinance is what we perceive it to be.

tensing

Tensing Rodrigues

It is unfortunate that in this play of perceptions, much is lost. The multitude for whom microfinance was the only ray of hope is still there; the solutions that microfinance was expected to offer for their problems are still feasible. It is time we look beyond the transient aberrations and see the bigger picture. I am happy that by now dust has settled on the unfortunate developments, and the players in the microfinance sector have begun to move forward.

But unless we “wake up” to the reality, probably we will continue to go in circles, returning to the undesirable time and again. And what is that reality ? I have always believed that microfinance can be fitted in neither of the two models : charity and profiteering. It has to evolve its own model of “symbiotic” business.

What do I mean by symbiotic business ? Exactly what that term is meant to mean. Merriam-Webster dictionary defines a symbiotic relationship as “a relationship between two entities which is mutually beneficial for the participants of the relationship”. Thus there is a positive-sum gain from cooperation. For instance, the bee extracts the flower’s pollen for protein and its nectar for energy. The bee, while collecting these, inadvertently carries pollen from one flower to another, and the flower’s reproduction process begins. This is in contrast with a predator-prey relationship, or a parasite-host relationship, which are zero sum relationships, where one player clearly benefits from the other. If a microfinance institution thrives at the cost of the community it serves, without a positive gain in the wellbeing of that community, then the relationship cannot be sustainable.

Therefore, a microfinance business model that is driven by profiteering cannot be viable. But the other extreme too is unviable. If we think that inclusive growth calls for charity, where the haves share their wealth with the have-nots, then we are moving on a wrong track. Charity is moved by one of the two drivers : piety or socialism. Both are unsustainable. We need to remember that we are not talking of destitutes. Microfinance is for those who are capable of productive economic activity, but are too small to fit into the mainstream business models; they cannot meet the current “minimum” requirements for entry into these models.

Therefore, the need to evolve a new model of symbiotic business. Now two models are possible for symbiotic business. The first is a model wherein the beneficiaries of microfinance pool together their own resources and create an enabling infrastructure; looks difficult, but it is within the realm of possibility. The second is a model wherein external entities provide financial support to them for a price; but a price which they can afford and which makes it viable for these external entities to sustain the support; gently but persistently, as a bee to a flower.

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