Microfinance India News Digest – 23/10/2009

Microfinance on mobile:

mChek says it has the key .Unlike in earlier other trials, mChek aims to empower the borrower rather than the loan collector, so she can maintain a bank balance and make other mobile transactions such as utility bill payments as well

E. Shantha, 32, earns just Rs1,500 a month cooking in an eatery located in the premises of a local court, but she totes a new mobile phone and even transacts over it.

Mobile transactions are a breeze for her, unlike the majority of over 456 million mobile phone users in the country who use their phones mainly to make and receive calls.

The mChek way: Women from Rajendra Nagar, a slum in Bangalore, at a microfinance meeting using mobile phones to make transactions. Hemant Mishra / Mint

The mChek way: Women from Rajendra Nagar, a slum in Bangalore, at a microfinance meeting using mobile phones to make transactions. Hemant Mishra / Mint

Shantha leads a group of seven women in a self-help group in Rajendra Nagar, a slum in east Bangalore, and ensures every member repays their loans on time. They meet every Tuesday morning, mobile phones in hand, and repay their loans.

“I got three days of training and now I can train others,” says the intrepid mother of two, who makes an average of five transactions a week including balance enquiries, deposits and withdrawals.

Shantha, who has taken a Rs9,000 micro loan to buy a welding machine for her husband, is among 100 women who are part of a year-long pilot run bymChek India Payment Systems Pvt. Ltd and Grameen Koota-Micro Finance Institution to implement mobile payments in the micro credit sector.

To take this beyond the pilot phase, mChek needs to tie up with a bank. Under Reserve Bank of India (RBI) norms, mobile payments have to be routed only through bank or credit card accounts. The Bangalore-based mobile payments company is in talks with half a dozen banks and aims to tie up with at least one by December.Rest of the article

Compartamos third-quarter net jumps 31 pct

Compartamos, a Mexican bank that makes small loans to family businesses, posted a 31 percent jump in net profit for the third quarter, thanks to solid lending growth.Compartamos (COMPARTO.MX), reported net profit of 359 million pesos ($28 million or Rs 135 Crores), compared with 274 million pesos for the third quarter of last year, the bank said in a statement on Tuesday.

Compartamos normally lends to one- or two-person businesses that typically borrow around $450 at annual interest rates of about 75 percent to buy supplies or capital equipment like sewing machines or juice makers.Lending by Compartamos in the third quarter rose 40.2 percent over the year-ago period to 7.07 billion pesos. Rest of the article

Macro Problems With Micro Loans

For years, micro loans have been promoted by everyone from Nicholas Kristof to Oprah Winfrey as a great way to help women in developing nations pull themselves out of poverty. The idea is simple: lend women a small amount of money to start businesses, thereby empowering them, their families, and ultimately their communities.Yet as it grows from a small, foundation-based practice to a full-fledged industry, micro loans are under new scrutiny.

Some commentators are skeptical that for-profit microfinance institutions can preserve their mission of helping the world’s poorest women get ahead. Moreover, some say that the loans themselves cause trouble, as the sudden influx of money inadvertently puts women in danger. Here are three of their biggest concerns:

The Business Is Too Big -Non-profit microfinance organizations have morphed into mega-corporations like India’s SKS, and Forbes’s Shloka Nath worries that they have forsaken their original purpose in search of a profit.Rest of the article

SKS Microfinance float poses question of profit and exploitation

Plans for a stock market flotation by India’s largest private microfinance lender have further inflamed the debate over whether the industry should be putting profits or the wellbeing of its impoverished clients first.SKS Microfinance specialises in lending small sums to very poor borrowers, many of them women, a process that it argues is helping to tackle poverty by funding small businesses.

The group, whose investors include Sequoia, the venture capital firm that famously backed Google, has talked to three investment banks — Citigroup, Credit Suisse and Kotak — about a listing in Mumbai that could raise up to $250 million (Rs 1200 Crores approx).

The deal, earmarked for the autumn, would be the first of its kind in India, one of the world’s biggest microfinance markets, and would offer investors exposure to a sector that many believe has huge potential. Some estimates have suggested that global demand for microcredit stands at about $250 billion, ten times the amount lent so far.Rest of the article

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