Rakesh Dubey has more than eighteen year of work experience in MFIs sector. He heads SVCL, a Gurgaon-based Microfinance Institution. While speaking to ‘Governance Today’ Dubey gives insight into emerging segments in microfinance.
What are the emerging areas that your focussed on? How competitive these sectors are?
We are planning to foray into Secured loans (Housing) and Green funding (e-rickshaws & solar lamps) from January 2016.
Every MFI follows the traditional way of providing micro loans to the low income households, so anything different from that can surely create a market for other types of needs. It also helps us broaden our services and hence stay competitive. Like, Housing loans and solar lamps are basic needs of people while e-rickshaws can help them in income generation.
At present, not many MFIs have forayed into housing loans or green funds so we definitely see a bigger growth opportunity in the sector.
How do you look at the commercial viability of these forays? Have any targets been set so far?
These are sectors where it is difficult to take loans from banks in rural areas so it opens up opportunities for us.
A house for example is a basic necessity for an individual. People borrow money from different sources including MFIs for various reasons which they actually use for building their house. So it is better they directly take housing loan. This section of industry is quite big.
For e-rickshaws, the rickshaw pullers pay around Rs 300-400 as rental per day. While, by taking loans from SVCL they would have to pay Rs.180-200 as installment per day and they will be able to own it from day one. The remaining earning they save everyday can actually go for the benefit of the family.
For the new products as mentioned above, we are planning to target at least 2 lakh members by 2017.
More MFIs are shifting their business to urban areas, how do you look at this issue?
It depends on the product and services which are being offered. Some of the MFIs which shifted to urban areas have actually converted to banks now. Rural definitely has more population and people there are more in need of financial help.
For example, although our major focus has always been on rural areas, we are planning to launch the e-rickshaw services in Delhi looking at the product category. E-rickshaws would work better in urban areas.
The insurance used to be a major project. What do you suggest to make this business commercially viable again?
All the borrowers are covered up to their loan amount. Basically about 3.5 Cr families, i.e. 10 Cr people are connected with MFIs and they are insured appropriately and adequately. MFIs have helped these families to generate income so they can take the term insurance policies as well as medical claim policies.
What changes you have seen in MFI operations in the last few years, especially after the Andhra incident?
In the last few years, MFIs have started operating at a speed. Now it is a regulated industry. Business Correspondent (BC model) model is coming back. Due to the increased progress, we can see how eight MFIs have got the license from RBI. In the last 3 years, fund flow in the MFI industry has been continuous.
Furthermore, the industry has got two Self-Regulatory Organizations (SRO’s)- MFIN and Sa-dhan and it has continuously been submitting the data and credit bureau on a weekly basis. So if a client wants to graduate to formal banking system they would have credit repayment records on which the bank can assess their credit worthiness.