Monday, September 10, 2012

“The few defaults are due to Migration & Natural Calamities”

M. R. Rao, CEO, SKS Microfinance Ltd.

Launched in 1998, SKS Microfinance is one of the fastest growing Micro Financial Institutions (MFIs) in the world, which has served more than 5 million women members in poor regions of India till date. Of course, the company has been in the news for the wrong reasons following the unceremonious exit of its ex-CEO Suresh Gurumani. Current CEO M. R. Rao talks about the company’s business model and challenges it faces:

B&E: Tell us about SKS’ entire delivery mechanism. What are your other major business growth drivers?
MR: SKS targets the poor and upper poor class. The upper poor class consists of families earning Rs.25,000-Rs.50,000 per annum like medium farmers, small entrepreneurs and families falling just above poverty line like landless laborers. This is the segment of the poor that can most benefit from microfinance. Overall, SKS’ target constitutes of rural (74%) and urban (26%). Through its NGO, Swayam Krishi Sangam, SKS works with the ultra poor or the destitute who need far more intense involvement and a kind of spoon feeding to nurture them and make them use their loans effectively. SKS provides the ultra poor with vocational training, social awareness and health awareness over an 18-month period and also provides these families with assets, which they are taught to manage.

Apart from income generating loans, SKS also offers insurance products jointly with Bajaj Allianz. We have covered nearly 2 million lives across our network with this product. SKS also provides life enhancing products like water purifiers, mobile phones and solar lights at a better prices than the existing market price. Also, SKS is providing housing loans and education loans, which are in the pilot phase. This February, SKS has tied-up with Metro Cash & Carry to supply inventory to SKS members who have Kirana stores.

B&E: How does SKS Micro Finance define its eligibility criteria?
MR: SKS follows the peer-lending model developed by the Grameen Bank of Bangladesh. There are two parts involved – formation & administration of the group. A group is a collection of five individuals who come together to gain access to credit. Groups are the building blocks of the peer-lending model, and strict credit discipline starts with strong groups. SKS uses five-member groups. Experience has shown that a five-member group is small enough to effectively enforce group peer pressure and collective responsibility on a unanimous basis. Groups must be self-chosen as only then will members be able to serve as guarantors to each other. Groups must have the following characteristics: Poor, close proximity of members, no close relations in order to avoid personal problems, mutual trust and the adult members should not be above the age of 55 years.


Source : IIPM Editorial, 2012.
For More IIPM Info, Visit below mentioned IIPM articles.
 
IIPM : The B-School with a Human Face
Posted by at
Labels: , , , , , , , , , , ,

Saturday, September 08, 2012

CANADA: DECELERATING GROWTH

After growing at a red hot annualised rate of 5.8% in Q1 2010, Canada’s Economic growth has come down to just 2% in Q2, 2010. Canadian policymakers now need to look beyond the ‘short cuts’, be it interest rates or output, if they want the Economy to sustain its growth momentum.

Even net exports made a 4.5 percentage point drag on overall GDP growth. Result: In July, Canada’s trade deficit widened to $2.69 billion, the biggest gap since records began in 1971. What’s more? Net exports have not been a positive contributor to GDP growth since Q1 2009. While it does not appear that the drag from net exports will slow down anytime soon, what’s more confusing is the continuing soft inflation (at 1.7%) amid weak productivity growth (0.6% yoy as of August 2010), fast wage gains, and a closing output gap. So, with fragile economic recovery underway and inflation rate at the bottom of its target range, is it appropriate on the part of BoC to further increase the interest rates after already having raised them thrice in 2010?

There are still many who don’t see this as a threat to the sustainability of the Canadian economy in the long run. Jimmy Jean, the US based economist at Moody’s Economy.com tells B&E, “The housing retrenchment was long expected and has not been excessively severe, even showing signs of recent stabilisation. The cooling observed in consumer spending ties in closely with the housing slowdown, which again makes sense and is not overly worrying in light of still-healthy income growth.”

But then, income growth is likely to slow further considering the impact of the weak GDP growth on employment (unemployment rate is already at 8%) and, in fact, one can already see it happening. Second quarter GDP data already indicates a slowdown in consumer spending growth to 2.6% (yoy) from 4.3% in Q1 2010. Though BoC had not replied back to B&E’s queries till the time the magazine went to print, it, however, in its latest press release, accepts that the recovery in Canada will be slightly more gradual than it had projected in its July Monetary Policy Report.

No doubt, looking ahead, the IMF too expects Canada’s economic recovery to be among the strongest of the G-7 countries over the next two years. But, at the same time it should not forget that when an economy is not working normally (as is the case with Canada), one cannot rely on the ‘short cuts’, be it interest rates or output. In other words, policymakers should leave the overnight rates at 1% during their next policy decision on October 19, 2010. Rather, they now need to work towards developing models that have a better understanding of money and credit flows at a more disaggregated level and that include the key institutional features of banking and capital markets. If Canadian policymakers look only at interest rates, inflation, and output, they might miss out on the bubbles that perhaps might be in the making. If that happens, it could spell a disaster for the Canadian economy. Well, they say, it’s always better to be safe than sorry!


Source : IIPM Editorial, 2012.
For More IIPM Info, Visit below mentioned IIPM articles.
 
IIPM : The B-School with a Human Face


Posted by at
Labels: , , , , , , , , , , , ,
Subscribe to: Posts (Atom)