While microcredit in India is growing steadily, the future for this segment appears to be gloomy owing to structural issues.The term microcredit has caught the attention of people all around the world. In India, the concept of microcredit existed long before Muhammad Yunus of Bangladesh initiated the process in 1970s. In its simplest form, microcredit means lending in small amounts to the economically weaker sections for productive purposes (except in case of housing units).
However, many financial institutions categorize consumer loans, say, to purchase jewelry, as microcredit on the grounds that the loans are in small amounts and they are lent to the rural people. The Reserve Bank of India (RBI) in January 2000 pegged the maximum limit of amount to be categorized as microfinance at Rs. 50,000 for a business enterprise and at Rs. 1.25 lakh for a housing unit. Several other commercial banks fix the maximum limit between Rs. 20,000 and Rs. 50,000. In the recent past, many banks, which once ignored this area, are now showing interest in it and microfinance as a separate segment has recorded an exorbitant growth. For the nine months ended December 2003, the total asset base under this segment stood at Rs.
2,800 cr. And the number of Self-Help Groups (SHGs) stood at 7,17,306 (approximately). However, by 2007, this figure is expected to go up to 12-14 lakhs. Despite the growth record, figures show that the supply of funds in the sector is far behind the demand. In order to meet the rising demand, the sector is required to grow at an even faster pace. According to the report `Task Force on Supportive Policy and Regulatory Framework for Microfinance in India' by National Bank for Agriculture and Rural Development (Nabard), on an average, a poor household uses a credit of Rs. 3,000 to 9,000 per annum. Going by this, the poor households, expected to be at about 50 million, will generate a demand for microcredit of Rs. 15,000 to 45,000 cr. Despite the potential, the segment's growth is bound by many regulatory hitches, which may decelerate the growth of the sector. |
