MFI refers to Microfinance Institution & GOI refers to Government of India
I start my article with a self confession that I am not against MFI’s; but am bit worried about their style of functioning. Am using this medium only to show how the GOI, even though has the biggest network as compared to any MFI, is simply ignoring it. By biggest network I would like to bring your kind attention to the “Post Offices of India & The Post Bank of India”. The Post bank of India operates under the Post Offices & not only has the biggest network in the country but also exists in the most hostile parts of India where these MFI’s would never dream of going.
Last few months there has been a buzz in the Indian markets & media regarding the MFI’s. Their story has been played in such a manner that they have been perceived as the “Banker for the Poor”…which is not true. Either there have been few names that have single handedly let to making of a big MFI or there has been an association of Individuals who have made a difference. Over the past decade the MFI sector has grown in size, prominence, stature & visibility through increasing participation of international & domestic banks, private equity investors & donors. However corporate governance related issued constitute the biggest challenge to the MFI’s in India
Let us look at the biggest network “The Post Offices & Post Bank of India”. We have post offices in every part of the country. Even small villages have post offices & are widely used by the people of India. The Post bank of India has been working for decades for the people in these small & rural areas of India, but the only reason of their not gaining prominence is either they are not promoted by the GOI or their staff is not having the required skill set to promote them selves. The deposits of the post bank of India has increased to something around 3lakh crore. There are more that 1,50,000 branches of the post network – bigger than any commercial bank or any MFI.
The post bank provides loan at a meager rate of 5 to 10% - in contrast the MFI’s provide loan at a rate ranging from 20 to 25%. This is where I want to highlight the role that GOI can play to save the poor or the so called “unbanked” – Unbanked is a term used by the MFI’s for the poor who have not been able to reach the bank in the past 60 years since independence. Our post offices can play a pivotal role in helping the rural areas get the loan an easier terms & those provided by MFI’s
The GOI can easily use post offices to be the biggest network in areas where the MFI’s would hesitate or to put it very frankly: - “would never venture in”. The GOI can use the post bank of India to connect to the most rural areas & also to the areas which are badly affected by naxalism & terrorism. The condition of our people in these areas is very pathetic, the post bank can connect them to the main stream & let them know that they are not alone & the GOI is there doing all it can do to help eradicate poverty.
Once a discussion on this issue starts in no time the GOI can implement schemes that the help the poor & the unbanked. I am not getting into giving ideas to the GOI, there are many capable & qualifies people who can do so.
I would like to conclude this article only by saying that the GOI needs to develop & maintain the best network to reach our people who have been deprived of the benefit they deserve because of poor conditions. 60 years of independence are good enough for the GOI to put their thinking hat & work for the under privileged section of the society. This could be a beginning that could go a long way & help our country over come its difficulties. In this article of mine I have highlighted “naxalism & terrorism” the main reason being & most people reading this article would agree that some times lack or deprivation of basic needs leads to people picking up guns & the time has come that we take guns away from our people & give them all the basic need as promised in the “Constitution of India”.