Tiny sector, big prospects
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- Published 18.12.08
Anindya Banerjee, a 25-year-old MBA from the Institute of Business Management and Research in Calcutta, joined Bandhan, one of the world’s largest microfinance institutes (MFIs), six months ago as a financial analyst. “I had come here for a project during my postgraduate studies. Since then, I have been hooked to the work. In India, the growth and opportunities in this sector are huge,” he exclaims.
Banerjee is in good company. Students at top business schools — including the Indian Institutes of Management (IIMs), and those at Yale and even Harvard — seem to have woken up to the microfinance miracle.
The financial services industry has been trimming its workforce furiously. Yet amidst the gloom, there’s a silver lining — the microfinance industry is going great guns.
“The brightest minds in the financial business are showing an interest in microfinance. In India, the sector will continue to grow because of the number of poor people here. There may be constraints in some microfinance institutes because of the financial crisis, but the long-term prospects look bright,” says Justin Oliver, managing director of the Centre for Microfinance (CMF), a special cell of the Institute of Financial Management and Research (IFMR), Chennai.
Microfinance rests on the conviction that poor people can be both reliable borrowers and avid entrepreneurs. “Microfinance still works; it has not been hit by the meltdown process,” Nobel Prize winner Muhammad Yunus said at an International Labour Organisation symposium in Geneva recently.
What’s more, the sector had shown similar resilience during economic recessions in the past, in south-east Asia and south America in the 1990s.
The industry hit the headlines last year when Yunus — nicknamed Bangladesh’s banker for the poor — received the Nobel Peace Prize for his efforts to “create economic and social development from below”. Other people too have been working relentlessly in the field, convincing banks and financial institutes that the poor can be trusted with small loans for minuscule business ventures.
“Agencies working in this area give loans to poor or low-income clients who have traditionally been denied credit by banks because of their inability to pledge collateral,” says Chandra Sekhar Ghosh, founder and chief executive of Bandhan. Adds Bhaswar Moitra, professor of economics at Jadavpur University, “Because banks or financial institutes themselves cannot recover loans from the poor, they consider MFIs a safe bet for offering credit.”
The poor rarely default on loans, and the rate of debt recovery is well over 95 per cent. Little wonder then that in India the sector is growing at a compound annual rate of 76 per cent.
“With such a high rate of growth, it will not be difficult for young professionals to find jobs in banks, MFIs and non-governmental organisations,” says Sankar Datta, founder and executive director of Basix India, a Hyderabad-based MFI. “One can also tap venture capital firms and corporate social responsibility divisions of banks and private companies,” he adds.
However, as Datta points out, unless one has an inclination for social work, he or she won’t thrive in this profession. “Those who are lured by huge salaries and a comfortable life should keep away. Social commitment is the key to success here,” says Ghosh. But then, the job satisfaction is immense and fulfilment from participating in a social revolution unparalleled.
Several institutes have sprung up to impart education and train professionals to fill the demand for qualified people in this sector. In most business schools, the economics and finance curricula have a section on microfinance. “The Institute of Rural Management, Anand (IRMA), has one of the best courses in microfinance management,” says Datta who taught at the institute.
IIM, Ahmedabad (IIM-A), and IIM, Lucknow (IIM-L), offer the subject as an elective in postgraduate programmes (PGP) in management and PGP in agri-business management (PGP-ABM). Recently, ICICI bank set up a group at IIM-A for research on microfinance, with M.S. Sriram, professor of microfinance, as the chairperson.
IFMR too offers an elective course in microfinance. The Centre for Microfinance, which was launched last year, is in partnership with various MFIs, banks, investors, and training and academic institutes in India as well as abroad, including the Massachusetts Institute of Technology (MIT), Yale, Harvard, New York University and the Indian School of Business.
The microfinance miracle
The economic crisis could actually turn out to be an opportunity for the microfinance sector in its search for managers and analysts,” says Oliver. The Centre for Microfinance has two short courses and is planning to launch a more extensive one soon.
A few private colleges have introduced long-term courses. In April this year, Sa-Dhan — a New Delhi-based association of community development finance institutions — in collaboration with the Indian Institute of Banking and Finance (IIBF), Lucknow, launched a diploma course for microfinance professionals. The institute also plans to offer specalised courses in risk management and product development.
The Indian School of Microfinance for Women (ISMW), Ahmedabad, has short courses on microfinance for development. “Since most of the beneficiaries in the sector are women, our courses are meant for them,” says Joy Deshmukh-Ranadive, director of the ISMW. “Growth lies in learning about the diverse dimensions of microfinance while on the job,” she says. Deshmukh-Ranadive feels that opportunities for microfinance professionals are likely to improve in the coming days, as marketers from various sectors are increasingly shifting their focus to rural markets.
So is it a lucrative career option? “It is not lucrative, but the pay is decent. Also, it has options for people across the spectrum. From financial analysts to field staff, there is a wide range of opportunities,” says Ghosh. For example, for the post of field staff or loan officer, matriculates between 18 and 28 years of age — who need not be computer literate or English speaking — are eligible. Promotions and growth opportunities are decent and an experienced credit officer can move to accounting or administration after three years of experience. The salary for loan officers at the entry level is between Rs 6,000 and Rs 8,000. However, those attached to banks and corporations can expect more.
Fresh management graduates can draw a starting salary of Rs 4 lakh to Rs 7.5 lakh per annum. They are usually hired as business development managers and entrusted with research and product development responsibilities so that services are delivered to the poor effectively. “They are major decision makers, and their job is interesting as well as challenging,” says Datta.
Experts believe that prospects will be even brighter when the sector integrates with the mainstream finance sector more closely. Says P. Mohanaiah, chief general manager, the National Bank for Agriculture and Rural Development (Nabard), “There is virtually unlimited scope for growth, and the benefits have to be reached to many more millions of the poor.” According to him, only those MFIs will be hit by the meltdown that depend on foreign institutes for aid.
IIM-A professor Sriram too agrees. “The sector is still commercially viable and profitable because it is not integrated with global markets and has also remained relatively out of the political radar. If microfinance organisations continue to grow at the same pace and without any interference from the state, there will be more opportunities for management graduates.”
‘I get to listen to very strong and motivated women’
Abhishek Chakrabarti, assistant branch manager of Bandhan, clocks in at 7:30am. He works with five credit officers and a couple of support staff at the branch office, usually located in a village or an urban slum.
A manager at a microfinance organisation has a long but off-the-beaten track day.
After going through a database of borrowers, Chakrabarti identifies specific self-help groups of micro entrepreneurs for monthly meetings. The groups are formed after a thorough survey of households in the area and identifying prospective borrowers. Each group consists of 20-30 individuals (usually women).
At the meetings new loans are disbursed and loan repayments monitored. This is the part Chakrabarti enjoys most. “We get to interact with some very strong and motivated women who rarely fail to repay loans. I listen to what they have to say for tips on how to tackle life’s greatest challenges,” he says.
On rare occasions, Chakrabarti has to handle loan non-repayments and loan frauds. In such cases, he has to visit a borrower’s home and talk to him or her personally.
Chakrabarti has to meet at least two self-help groups in different locations every day. He returns to the branch office around 4pm and checks the ledgers and balance sheets of collections and loan disbursements. His day ends around 8pm.