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Field Notes From… Urban Microlending in Southern India

microlending in india

This past week I had a chance to see some of the disability inclusion work Accion has facilitated in the field, during visits in both Bangalore and Chennai. Chennai, a five-hour train ride heading east from Bangalore, is the capital of Tamil Nadu, a state home to many colorful and dramatic temples, Indian Ocean sea breezes, and the relatively ancient Tamil culture. We had the opportunity to make a trip to one local Equitas branch in each city, meeting with branch managers, loan officers and clients themselves. We were also able to visit the Equitas headquarters in Chennai to get a fascinating glimpse at the inner workings of a microfinance institution (MFI) and speak with the upper management.

An inside look at the Equitas headquarters – many workers spend all day processing paper loan applications and other client documents, but the whole system will be digitized soon.

Equitas is one of the MFIs that the CFI at Accion has worked with, and its top managers and officers received disability sensitization training by Accion’s technical partner, v-shesh. The hope is that these trainings will trickle down to the field staff and indeed, the loan officer whose clients we met seemed to have a strong personal mandate to include especially vulnerable people with disabilities in microfinance.

On foot with a loan officer in a colorful north Chennai neighborhood.

It was, of course, personally meaningful to meet face to face with five women and one man with varying disabilities, who are all successfully taking on loans and repaying them, supporting themselves and their families along through difficult circumstances. Anecdotal as it may be, it was fascinating to note the catalytic role microfinance played in keeping their small enterprises alive.

A few

trends stuck out to me at the conclusion of these visits; they are not new observations and have been documented in much research on the financial lives and needs of the poor (for example, in the Kenya Financial Diaries or Portfolios of the Poor ):

  • Microfinance played an important role for all the clients we spoke with, allowing them to reinvest in their businesses (mostly by purchasing additional raw materials for their small flower stringing, clothing or chemical mixing enterprises). However, all of them would have accessed loans whether or not they had microfinance; with formal microfinance, they were able to access credit at a slightly lower interest rate.
  • Most of the individuals we spoke with make their income up from numerous small enterprises that they divide their time and resources among. They also most likely use their loans for consumptive rather than purely “productive” purposes.
  • More specialized and individual loan options are needed – some individuals in group lending schemes would like to qualify for loans that allow them to finance property or perhaps an assistive mobility device.
  • Microfinance is far from the only social service needed by these individuals, especially those with disabilities. Credit must be integrated into health, education, and disability-specific services in order to have a measurable impact on poverty.
  • Outreach from MFIs, through loan officers’ routine work in the field, to marginalized groups, such as people with disabilities, can have a positive effect on eroding community-based stigmatization.

Mandana Nakhai is working out of Bangalore, India, in Accion’s local hub office, on developing strategic partnerships between MFIs and organizations that serve people with disabilities to understand their financial needs and link finance to livelihood and entrepreneurship programming.

Category: Payday loans

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