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Urban Microfinance Issues
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There should be a separate chapter on urban microfinancing, it is expected by 2030 the total population in urban
areas will be 600 million and lot more needs to be done in this area. Some other specific issues are: creation of an
organization for financing or modifying the norms and rules of NABARD so that they can also cover urban areas or
there should be a central financing agency for urban microfinance. There should be one agency which should cover
the database as there is no classified data available on rural and urban.
•
In urban and metro cities there are segments of people who earn but cannot save because they don’t have an identity
card (KYC) to open bank accounts. Thus lack of KYC documents does not permits that segment with access to
banking services and these segments needs to be looked at in the report.
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Urban poverty and financial services is a common problem all across. Microfinance services for micro entrepreneurs
should be taken up as a challenge in the report as no banks or financial institutions are supporting them. WASME
can help to provide content for this part.
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In urban areas BASIX has helped 800 SHGs through skill development and also helped some SHGs to function as
BCs in Delhi.
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There is a need for national study of cooperatives. We need to classify between the urban and rural cooperatives as
most of the urban cooperatives have been doing very well in many areas.
(Sachin Hirani, Anoop Kaul, Tara Nair, Navin Anand)
Housing Microfinance
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Presently there seems a significant gap in practice and theory of housing microfinance. More focused approach is
required for housing MF in India including research.
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There are two main factors in housing microfinance (i) Informality of Income and (ii) informality of tenure/title.
Since most of these loans are considered as unsecured loans by National Housing Bank many housing finance
companies like Shubham, Aadhar, India Shelter and SwarnaPragati have developed models to ascertain household
income and work out the affordability and EMI part. These HFCs have tried to reach the informal segment through
means of alternative documents. There are several alternative documents available or could be created which could
provide as a security for lending to this segment.
(Shruti Gonsalves, Navin Anand)
Cost of Delivering MF Services and Need for Cross Subsidization
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Financial literacy/capability is an important component of financial inclusion but funding the financial literacy
initiatives is still a challenge, there is no established funding mechanism to bear the cost. Options like PPP or Vi-
ability Gap Funding should be explored and taken to the government as most appropriate strategy for promotion
and sustainability of financial literacy initiatives.
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The real cost of financial inclusion should be examined in the report as the banks find it very expensive and want
only bigger MFIs to partner with. It is important to understand what it costs to provide a package of services and
reach the poor households. There are lots of MFIs that have gone into BC model but don’t see an impact on the
interest being changed after successful growth of BC. Unless the cost of funds for the poor is lowered they will not
come forward and access all the services. Even the producer organisations are not able to open bank accounts due to
costs associated. If there is any example where more than one service is provided with lowered costs then it can be
taken up as a case study in the report.
