Micro-finance: Reaching Consumers at the bottom of the pyramid

Suvarna,a frail,49-year old, grocery vendor in the village of Junnar in Maharashtra's Pune district is spoilt for choice in borrowing money, and the local moneylender is at the bottom of the pile in options.She is being offered Rs.15000 at a seemingly still steep, but less usurious, interest rate of 24% by the likes of SKS Microfinance and Share Microfin.

So far, Seven banks have managed to tap over 50 lakh customers across the country in this segment disbursing about Rs.3000 crore.But thats only a tiny percentage of the addressable market size of 6-7 crore potential customers capable of absorbing about Rs.40,000 crore, shows estimates by Micro=Credit Ratings International. It believes the 60 mn low-income households in India can consume credit worth Rs.8000 cr every year.

Banks are putting in place strategies - both plain vanilla and innovative - in order to achieve some aggressive targets.
ABN Amro Bank
Target: By 2009,10 lakh customers and portfolio of Rs.600 crore.
Key Innovations: Taking the perspective of venture capitalist rather than the lender. ABN Amro Foundation is incubating six-start up MFI's now, with plans to do another 50 MFI's start-ups in 3 yrs.

DCB
Target: Portfolio of Rs.500 cr in 18-24 months.
Key Innovations: Set up a dedicated MFI branch in Bharuch (Gujarat).Plans to use this as a hub to reach 1000 villages.

HDFC Bank
Target: To grow at 100% CAGR over the next 3 yrs.
Key Innovations: Opened a dedicated Self-help groups (SHG) branch in Tamil Nadu,which has over 10,000 individual customers associated with SHGs.By March 2008, a dozen such dedicated branches, pan-India,is planned.

ICICI Bank
Target: N.A
Key Innovation: Floated amicro-finance factory to incubate,churn out and support newer MFI models and provide support to entrpreneurs. Setting up a fanchisee model for MFIs.

Yes Bank
Target: Customer base of 5-7.5 lakh and portfolio of Rs.300 crore by 2012.
Key Innovation: Has identified urban micro-finance as a niche. Plans to disburse loans directly through Yes Microfinance India.

Source: Outlook Business