bu i ld i ng an i nc lu s i ve f i nanc i a l s e ctor i n i nd i a
113
But, as Ramanathan points out, ‘it is very hard to innovate
in partnership arrangements as partners have their own
legacy and constraints’.
CONCLUSION
Despite their unclear role in the process of financial inclu-
sion, microfinance purveyors have steadily emerged as an
important component of the general scheme to liberalize
the financial sector, which has accorded them a degree of
salience in recent times. The recent policy pronounce-
ments indicate that they are poised for a drastically differ-
ent direction of growth thanks to the RBI’s emphasis on
restructuring and reforming the banking structure with
a definite push towards opening up financial markets for
more competition and deepening. The recommendations
that have arisen from the current constellation of ideas
see a distinct role of MFIs to be part of the financial in-
clusion arena either by linking with large banks as limited
BCs to provide savings services, or, more importantly,
become deposit taking small finance banks (Government
of India, 2009). It appears that Indian MFIs—at least
the bigger and the more efficient among them—will soon
be playing a more independent and substantive role in
financial inclusion.
B
OX
4.5
Informality and Exclusion
Janalakshmi conducted a footprint enterprise survey in 2013 in one of its branches in Banglore. The survey covered all enterprises
excluding large franchises, shopping malls and large retail chains. It included street vendors, both stationary and mobile. The
sample was made up predominantly of enterprises with two or lesser employees, accounting for over 90 per cent of the enterprises.
All enterprises in the sample have less than six employees. 98.2 per cent of the sample consists of proprietary enterprises. 70 per cent
of micro-enterprises have a bank account. The percentage of respondents who reported accessing public or private banks for term
loans was just 5 per cent. As for working capital, the percentage of respondents who reported accessing public banks for was
0.5 per cent. None reported accessing private banks for working capital needs.
The study found a large extent of informality among survey respondents. 90 per cent of the respondents never filed income
taxes, 67 per cent had maintained no book of accounts and 65 per cent had no enterprises registration of any form. Not surpris-
ingly, a majority of respondents accessed informal sources of finance for their credit needs. Over the previous two years the average
credit requirement for micro enterprises in sample was estimated to be Rs. 439,911. With the estimated number of urban micro
enterprises to be 420813 this would translate into an aggregate demand for credit of Rs. 189 billion. Since banks alone would not
be able to meet this demand, other regulated local players like MFIs need to be facilitated to contribute to the process of financial
inclusion of urban micro and tiny enterprises.
Source
: Jana Foundation (2013).
