I’ve just gotten back from another day out at one of Saija’s branches, hard at work on this July 4th. While my colleagues in Boston are all enjoying their long three day weekends, I am here in Bihar, where we work on Saturdays! (A six day work week… no wonder the pace of development is so rapid here!) Not that I’m complaining, of course: this kind of departure from the normal routine is exactly what I signed on for. I actually think that it can sometimes take a change like this to shift our thinking, to make us open to really learning something from our experiences.
I just wanted to take a couple of paragraphs to reflect on this idea of departure and exploration, because of its centrality to the whole Ambassador experience, and to call your attention to another blog that you might want to check out if you’re interested in other instances of soul-searching in the microfinance industry.
The blog belongs to Vijay Mahajan, the founder and chairman of BASIX, which has grown over the past fifteen years to become one of India’s largest MFIs (1.5 million active borrowers, according to the MIX). At the beginning of 2011, with the Indian microfinance industry in the throes of crisis and with thirty years of his career in development behind him, Vijay Mahajan began a project, a journey of personal and professional reflection that he called a shodh yatra: “An extended grassroots enquiry into the lives and livelihoods of poor people.” And he blogged practically every step of the way.
So, what is a shodh yatra?
This post is the first in a series that will explore the implications of a changing regulatory environment for ACCION’s work in India. True to our first priority in microfinance, the series will begin and end with a focus on the clients — the men and women who have come to count on access to financial services to improve their businesses and their lives. We’ll also look at the recent events and changes in some depth, and consider things from the standpoint of the microfinance institutions as well.
I’m here at one of Saija’s branch offices overlooking a dusty commercial street in Danapur, a little city along the Ganges that gradually grew into neighboring Patna, and vice versa, so I guess you could call it Patna’s “little sister” city. Danapur is home to a cantonment of India’s armed forces, and within another few years, a major new railroad and highway bridge that will finally give Patna a direct freight link with northern Bihar. And as we speak, India’s inexorable march of development continues to fill in what little parcels of land are left between here and Patna.
There’s a whole slate of disbursements scheduled for today; I watch as the branch manager writes out the list of recipient groups on the whiteboard. All new disbursements at Saija — fresh loan cycles — are now being made in full compliance with the Reserve Bank of India’s new guidelines for the country’s microfinance industry. This means that the total loan amount for any client is now capped at Rs. 15,000 for the entire year (just over $330).
This is a big deal, especially for Saija’s business loan clients: some of these clients were receiving Rs. 20,000 and 22,000 at at time, all within cycles of six months apiece. That amounts to as much as a 65% reduction in funding in some cases.
I introduce myself to a group of five men who each run small businesses here in Danapur. These men are receiving a group business loan: using a familiar model in microfinance, each man’s repayments are guaranteed by his peers. I quickly learn that I have made the acquaintance of a garment peddler/clothier, two grocers, a scrap collector, and an optician.
As of Friday, June 24th, Saija’s mobile payment pilot is officially under way.
Over the next six months, Saija will be determining the effectiveness of a mobile repayment option for its SKR (microbusiness loan) clients. The pilot is being implemented in partnership with Eko, a Delhi-based startup that is building low-cost financial services infrastructure with the goal of financial inclusion, or “to democratize financial services for the un-banked,” as they put it. Eko’s geographic focus (for now) is the very-populated-yet-underserved corridor between Delhi, Uttar Pradesh, and Bihar, which correlates exactly with Saija’s existing footprint and expansion plans.
In Saija’s normal payment collection process, loan officers are required to visit the businesses of each borrowing group leader. With payments scheduled as frequently as three times per week, and an average of 146 clients per loan officer, this can make for a pretty demanding weekly schedule. And for the the business owners, this arrangement means staying put for a span of several hours and waiting for the loan officer to arrive. So, there are definitely opportunity costs on both sides of the equation.
If implemented properly, mobile repayments will mean time saved, costs reduced, and most importantly, flexibility and convenience for the clients. I was there to witness Saija’s very first mobile microloan repayment on the 24th, followed by perhaps half a dozen more on the following day. How did things pan out?
At last I have arrived in Patna, the home of ACCION partner Saija Finance Private Limited. At ACCION, we frequently and proudly note that Saija is at work in one of the most challenging and underserved places on earth: Bihar, India’s poorest state. With an overall literacy rate hovering below 50% (and among women, only 33%), lagging infrastructure, high incidence of crime, and a legacy of political corruption, there are certainly many challenges to overcome here, and not just for microenterpreneurs.
So it was no surprise when I received a whole litany of advice and opinions about Bihar before I began my journey, focusing mainly on my safety (or lack thereof). But the idea that stuck with me the most, far more than the warnings, was the promise that in Bihar I would be able to glimpse the “real” India.
This idea of “realness,” which I took to mean “authenticity” or “purity of experience,” first surfaced during the Ambassador training week in Boston. Stephen was on his way to Bangalore, the shining nexus of the Silicon Plateau? That’s not the real India! And Nirav and Ruhi were preparing for their summer in cosmopolitan Mumbai, where they even have a Hard Rock Cafe!* So we began a conversation about what, exactly, the “real India” could be, and together we considered what might constitute “authenticity” in this particular context. Some of this discussion is already reflected on our blog: see Stephen’s first post from Bangalore, including the comments. The dialogue is far from closed at this point, so here are some additional ideas and resources to consider: