By Samit Ghosh , MD – Ujjivan Financial Services
FOROMIC 2010 – One of the largest global MFI summits was held in Uruguay this year. It had over 1300 delegates from 43 countries. For the first time, delegates from Asia – India and China – were invited for the conference. Mr Samit Ghosh – Managing Director of Ujjivan Financial Services represented India at the Summit. Given below are Mr Ghosh’s views post visit to the summit
I was privileged to attend FOROMIC 2010 (Inter American Forum on Microenterprise), the premier summit of microfinance at the invitation of Inter American Development Bank (IDB) held at Montevideo October 6-8, 2010. Latin America has a long history and a highly evolved microfinance industry. This was the first time delegates were invited from Asia: China and India. The learning from this exposure and interaction was very valuable:
- This was the 13th annual Inter-American forum of all the stake holders of microfinance in Latin America attended by over 1300 delegates from over 43 countries. This summit is organized by the Inter American Development Bank and held by rotation by different countries, whose governments vie to host the Summit! The President of Uruguay, Minister of Finance and a host of central bankers attended the Summit. To me the spirit of collaboration among the government, regulators, bankers and the microfinance industry in pursuit of financial inclusion was a revelation. In India despite all four stakeholders having the same objective, we seem to be constantly at the opposite ends of the table engaged in counter-productive contradictions. Perhaps development financial institutions like SIDBI and NABARD can play the role like IBD to bring all the stake holders of microfinance in India together.
- Latin American microfinance is on a different plane. The MFIs have transformed from their origins as NGOs to For Profit Organizations and finally are in the third stage when they are fast converting to banks to provide full range of financial services to effectively work towards financial inclusion. RBI could study the evolutionary process in these countries to provide guidelines for the newly proposed banks for financial inclusion.
- The Central Bank of Brazil also tried the Banking Correspondent model and the Simplified Account (their version of no frill account) for financial inclusion. Argentina has also launched their version of the ‘Simplified Account’. The Central Bank of Mexico also has produced a 300 page report on financial inclusion. There has been serious setback to financial inclusion in Columbia which introduced interest ceilings.
- In Latin America financial inclusion through microfinance has been successful in the smaller countries like Bolivia and Peru but not so successful in larger countries like Brazil and Mexico. They are very keen to know how in India with the huge poor population, MFIs are growing rapidly to serve the market and also learn about microfinance initiatives in China.
- Latin America has had a number of MFI failures and a detailed study has been done on this and was discussed at length. One of the major reasons was: uncontrolled growth. This certainly has a serious lesson for us. The report in English will be available in a month and it will be well worth studying by the microfinance industry in India.
- Issues of interest rates, interest rate ceiling, Government interventions, over extension of credit, excessive competition and controversial IPO are areas of common interest both in Latin America and India.
- Finally, the highly regarded report, Global Microscope on the Microfinance Business Environment was released on October 8th, 2010. This report ranks countries based on three parameters: Regulatory Framework, Investment climate & Institutional Development. This year, for the first time it covered countries across the world. India is in the top ten and ranks #8. Not so surprisingly we rank second in Asia after Pakistan # 5 but strangely Bangladesh ranks # 33. The report is a must read for all stakeholders of microfinance and can be downloaded here. The report is sponsored by: IFC, Inter-American Development Bank and Andean Development Corporation.
We have a lot to learn from each other and we need to promote exchanges between the microfinance industry in India and Latin America through conferences like FOROMIC in Latin America and Access Microfinance Summit in India and exchange visits by MFIs through the offices of MFIN & Sa-Dhan.