ASSOCHAM Microfinance Conference: "Strangulate or Regulate?"

This past Thursday the CEO of SRFS was kind enough to take me along with him to a conference on the recent national regulations of the Indian microfinance industry hosted by the Associated Chambers of Commerce and Industry. The event featured numerous officials from the banking industry, the government, government banks, and CEOs of various microfinance firms. The first few hours were largely introductions and welcome, with many members of government and the banking community coming out to support the MFIs. As the CEO of Ujjivan noted, it was encouraging for them to have this support since "there are not too many friends of microfinance today." The second section was the technical session on whether the new legislation was "strangluation or regulation." This section featured a round panel of IMFR representatives, CEOs of Ujjivan and Grameen Koota, and a representative of the Oriental Bank. For the most part, they supported the current legislation, which includes interest rate caps, profit margin caps, limits on household incomes of client families, and minimum requirements for amount of the loan portfolio directed to income generation activities. On the other hand, many voiced concerns that the legislation was to some extent unenforcable, due to its reliance on the lending banks as an enforcement mechanism, and its restrictions on household income, which is data not often available to the MFI. They are also concerned that interest rate caps will push the MFIs out of the higher cost (largely rural) areas, so that they can continue to make profit even at lower interest rates. The conference concluded with the MFIs sending recommendations to the government of Karnataka via ASSOCHAM.

This next week will be spent entirely in the field, concluding our interviews of SRFS clients. We will spend two days in Hosur, two days in Kodamballi, and one day in Channapatna. The week after that is our final week in India, and we will spend it conducting interviews of the management of other MFIs with whom we connected at the conference. This will provide us with some "counter-factuals" to the SRFS business model. Finally, we plan to conduct exit interviews with some SRFS officials, and will fly out early the next week.