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By S V Raja Vaidyanathan
Financial inclusion is generally defined in terms of financial exclusion. In India, majority of the population belongs to lower income group. But the facilities which can be availed be it financial services or any other, generally targets the few rich people. Thereby the low-income group gets neglected. This is the kind of exclusion which needs to be highlighted by favoring the concept of Financial Inclusion.
The great tragedy lies in the fact that sometimes even though there are certain financial services, specially designed to meet the needs of these people, they remain unaware about the same due to illiteracy or other reasons. Thus, lack of awareness also leads to the financial exclusion.
Role of Microfinance: The main aim of financial inclusion is to make the financial services accessible to lower income group and that is where role of micro finance comes in. For the achievement of financial inclusion, the most important goal is to make the banking facilities available to all the unbanked areas and each household.
Microfinance plays a very important role in financial inclusion in different ways such as: Micro credit is provided to poor women in remote areas who have income generating activities.
There are various organizations providing micro credit with which they also conduct training for first time customers and impact their financial literacy and explain about the various microfinance products available to them. NBFC-MFIs play an important role in the government’s agenda of Financial Inclusion as they cater to the unbanked sections of Indian society under the regulatory oversight of the Reserve Bank of India (RBI).
The Microfinance industry has witnessed impressive growth over the past five years, growing over the past five years, growing at a Compound Annual Growth Rate (CAGR) of 45 percent. It has evolved and matured with regulatory reforms following the Andhra Pradesh crisis (in 2010). Following regulatory reforms covering code of conduct, fair practices, pricing of loans we have seen the emergence of regulated NBFC MFIs, the formation of a Self-Regulatory Organization (SRO), and transformation of some MFIs into universal and small finance banks.
With over 60 million end clients, a loan book of over Rs 1.50 lakh core, and employing over 1.2 lakh people across 10,000 plus branches, the microfinance sector has emerged as a formidable force for the spread of financial inclusion in India.
Despite the growth, the industry caters to less than 25 percent of the demand and this indicates the potential for future growth. The outreach of MFI has been growing rapidly over the past few years due to low penetration of formal banking system, especially among lower income groups.
The impact of demonetization has nudged the MFI sector to move towards cashless modes of operation. However, it is expected that a significant proportion of MFI transaction (mainly collections) would continue to be in cash due to small ticket size, and low penetration of smartphones among its low-income customer base. However, the fact today is that Technology and innovation have become key drivers of economic growth
We expect the industry to register a modest growth of 30 per cent.
Asirvad, a subsidiary of Manappuram has been playing a significant role in the NBFC-MFI space. We have completed 11 years so far. Our growth strategy was very different initially. We always wanted to reach highest productivity in one territory before moving on to newer one.
Soon after acquisition by Manappuram, the philosophy changed to mitigation of risk and hence the diversification strategy. With a neatly laid out plan and ample support from the parent, Asirvad soon spread its wings and as we speak has its footprint across 22 states and Union territories in India with a branch network close to 1000 branches. The company in its fold has 1.8 Million borrowers with a AUM of nearly 4000 Crores.
The future looks more exciting for the company. With the support of Manappuram, Asirvad will certainly emerge as one of the top three in the Industry. By 2022 the AUM is sure to cross 10000 Crores.
The journey has not been very smooth but it’s certainly satisfying given the fact that we put smiles across million women in India. With these small loans we help them to dream big.
Asirvad is committed to be a long-term player in the Financial Inclusion space and will continue to play a vital role in supporting the Government in this endeavor.
(The writer is MD - Asirvad Microfinance Limited)