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How OPIC is helping advance financial inclusion in India

By Iftin Fatah, OPIC Portfolio Monitoring Specialist – Development Partnership Framework Division 

Three women who access financial services through an OPIC-supported microfinance institution use loans to support their farms and small businesses.
Financial inclusion has come a long way in India, but it still has a long way to go. Five years ago, only about one-third of India’s adult population had an account at a traditional banking institution, according to World Bank data.  Over the last few years, the government has enacted a number of reforms to improve access to financing to the underserved or excluded populations. Today, financial inclusion ranks high on the priority list of the Government of India and the Reserve Bank of India (RBI).

In August 2014, when Prime Minister Narendra Modi announced a national mission of financial inclusion envisioning bank accounts for all Indians, 15 million bank accounts were added on the first day alone. This helped bring official rates of financial inclusion to 53 percent and was a significant step in the right direction. However, since many of these were zero balance accounts, many Indians are still not making use of basic financial tools. Rapidly expanding mobile penetration in India is expected to contribute significantly to reaching the unbanked.

India is a country where OPIC supports multiple projects and has a strong microfinance lending portfolio. Last year, OPIC’s portfolio of microfinance projects surpassed the $1 billion mark, and India accounts for a significant share of that total.

Last month, I visited a number of the microfinance institutions that OPIC supports in India as part of a monitoring trip, and I was able to see how these projects are benefiting many of the country’s underserved communities, including women and people who live in rural areas. OPIC supports these projects through a variety of strategic partnerships with financial institutions and non-bank financial institutions. During the trip, we met with our partners as well as senior management at the MFIs to listen to their long term plans for improving access to finance, and learn about the microfinance landscape, and corporate social responsibility initiatives aimed at improving the livelihoods of borrowers.

One of our first stops was to Grameen Koota Financial Services (GKFS), a Smart Campaign-Certified Bangalore-based MFI that caters to the financial needs of poor women. GKFS has nearly 1.4 million members serviced through a network of 310 branches and over 4,000 employees.  GKFS has a strong presence in rural areas where it caters to the poorest segments of society. Of its total customer base, 70% are based in rural areas and approximately 70 percent earn less than $2 per day.

GFKS management continues to remain focused on being a socially-focused institution, as evidenced by GKFS being awarded as best MFI in India (large MFI category) for 2015 by Access Development services along with HSBC India. Navya Disha, a registered charitable Trust, is a partner of GKFS to implement its CSR initiatives with an aim to empower people belonging to poor households to help them secure respectable livelihoods while ensuring environmental sustainability and gender equality.  To make its efforts sustainable, Navya Disha closely works with GKFS in mobilizing loan funds required by the members along with free technical help for constructing toilets and getting water connections, to attain total sanitation in as many villages as possible.

The increasing use of mobile platforms and other technology continues to change the microfinance landscape. This was particularly the case for Chennai-based Madura Microfinance Limited. The company’s loan officers use wireless tablets and phones to input data from loan originations and borrower monitoring that is shared with headquarters on a daily basis. We were able to see this first hand during our visit to the Timdivanam branch, which has over 4,000 members and is serviced by 2 branch managers. All loan collection and borrower meeting attendance is updated on a real-time basis through its mobile online system. This push towards cashless transactions eliminates the middleman, reduces instances of fraud, and cuts down processing time.

The author with a group of Tamil women MFI borrowers from Chennai.

While visiting one of Madura’s branches, I met with a group of female borrowers, who had a fairly long track record of supporting their businesses and farms with microfinance lending. As individual borrowers in a “group loan” these women are required to meet on a regular basis to hold each other accountable to repay their respective loans, to ask questions of member service representatives regarding interest rates, repayments, and other potential concerns, and to learn about social initiatives that the MFI is offering.

OPIC support of these MFIs and others throughout India continue to provide increased access to financial services to low-income entrepreneurs, most of them women. This is in line with OPIC’s continued support of the Sustainable Development Goals, the unanimously adopted UN General Assembly plan that succeeds the Millennium Development Goals, which overlaps with a number of OPIC focus areas.









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