The 8th Eastern India Microfinance Summit 2024 to be hosted by AMFI-WB
in Association with M2i, Equifax, MFIN & Sa-Dhan

Title of the Summit: Empowering The Poor: Microfinance as a Catalyst for Sustainable Development

Kolkata, 12th February 2024: The Association of Microfinance Institutions – West Bengal (AMFI-WB) will be organizing the 8th Edition of Eastern India Microfinance Summit 2024 in Association with M2i, Equifax, MFIN & Sa-Dhan. This year the theme of the Summit is “Empowering the Poor: Microfinance as a Catalyst for Sustainable Development”. The 8th Eastern India Microfinance Summit 2024 will be held on 22nd of February 2024 from 9.00 AM onwards at Biswa Bangla Convention Centre, HIDCO, New Town, Kolkata.

A Team consisting of Dr. Alok Misra, CEO & Director, MFIN, Mr. Dr. Kuldip Maity, Secretary, AMFI-WB and MD VFS Capital Ltd., Mr. Manoj Nambiar, MD, Arohan Financial Services Ltd. And Mr. Kartick Biswas, MD, Uttrayan Financial Services Pvt. Ltd. briefed the media about the Summit at the Press Conference at Kolkata Press Club on 12th of February 2024.

Microfinance is widely recognized as a powerful tool, contributing to and propelling towards achieving sustainable development goals. Its multifaceted roles encompass some of the key aspects instrumental in fostering sustainable development. Through financial inclusion, microfinance democratizes access to capital, empowering marginalized communities and amplifying economic participation. It contributes to poverty alleviation, offering avenues for entrepreneurship and job creation. Microfinance also champions gender equality by providing women with access to financial services. As a catalyst for change, microfinance intertwines financial empowerment with social empowerment, paving the way towards a more inclusive and sustainable future. This year's session is expected to be attended by the MFIs practitioners, regulators and funders to discuss most pertinent issues facing the sector.
The 8th Eastern Indian Microfinance Summit is being organized to re-evaluate the strategic roadmap necessary for the microfinance industry to build products taking advantage of digital tools and technologies to serve their clients in a robust and client friendly manner. The recent RBI-released guidelines for the microfinance industry have unleashed the competitive forces in the industry pinning greater responsibility on Boards of individual companies and SRO and the sector is well placed to take advantage of these regulations in reaching out to the vast underserved and unserved market [As per MFIN, the current market potential is Rs11 lakh 42 thousand crore as against current outreach of around 3 lakh crore]. Key principles of fact sheet and limit on maximum possible indebtedness introduced under the new regulatory framework will foster transparency and enable the clients to make informed decisions related to credit. As the regulations are now “legal form” agnostic, it will lead to sustainable and responsible growth of microfinance.

This year’s session is expected to be attended by the MFI practitioners, regulators and funders to discuss most pertinent issues facing the sector. The Summit aims to bring together the national and global community of stakeholders, particularly lenders and Investors, to discuss current and future aspects of financial inclusion, and how digital aspect can be integrated in a client friendly manner.

Discussions in the 7th Eastern India Microfinance summit 2023 will focus on the following themes:

Inaugural session

• ● Which are the most important dimensions of the Sustainable Development Goals (SDGs) which Microfinance impacts.
• ● What strategies the MFIs can adopt to enhance their role in the Sustainable Development Goals.
• ● What new innovations are required in microfinance delivery models to ensure that it remains relevant in the changing regulatory, socio-economic and technological paradigm.
• ● In what ways can microfinance programs be tailored to address the unique needs and challenges faced by women, ensuring gender equality and empowerment?
• ● How can technology be leveraged to expand the reach and effectiveness of microfinance initiatives, making them more accessible and inclusive?

Session 1: WE-LEAD – A Transformative project for women entrepreneurship

• ● Enhancing livelihood security for the poor and their households stands as a top priority for development agencies, including the government, particularly in developing countries like India. Access to finance, need-based training in entrepreneurship, and skill-building can significantly contribute to promoting, expanding, and sustaining livelihood opportunities for the poor.
• ● Recognizing this importance, SIDBI has launched its "Women Entrepreneurship- Livelihood Enhancement and Development (WE-LEAD)” program in the state of West Bengal with Association of Micro Financial Institutions – West Bengal (AMFI-WB) as the implementing partner.
• ● The primary objective is to promote and strengthen entrepreneurship among women Self Help Group/Joint Liability Group members in six districts (South 24 Parganas, Howrah, Bankura, Birbhum, Nadia, and South Dinajpur) of West Bengal. As outlined, AMFI-WB collaborates with its Member MFIs to implement the program in these six districts, three of which are Aspirational Districts in West Bengal. In this session, key learning and experiences from this innovative project will be shared.

Session 2: Strategies for Scaling from Group Lending to Individual Micro-Enterprise Loans

As the demand for larger micro-enterprise loans grows, the imperative to shift from group lending to individual models in microfinance becomes evident. This requires several changes in the way microfinance institutions operate and the way stakeholders support these institutions. From redefining operational frameworks and staff training to modifying risk management frameworks, this transition demands a comprehensive approach. This will also require access to capital to enable the MFIs to expand this portfolio. Panelists in this session will discuss the following key issues.

• ● How does promotion of microenterprises loans lead to contribution to the SDG1 (No Poverty), and SDG 8 (Decent work and Economic Growth)?
• ● How can microfinance institutions strategically adapt their operational models to facilitate a smooth transition from group lending to individual micro-enterprise loans?
• ● What training programs and capacity-building initiatives are essential for MFI staff to effectively manage the shift towards individual lending and navigate the increased complexities?
• ● In transitioning to individual loans, how can MFIs balance the need for increased risk management without compromising their commitment to financial inclusion and accessibility?
• ● What role does technology play in supporting the scalability of individual micro-enterprise loans, and how can it be harnessed to streamline processes and enhance efficiency?
• ● Addressing the capital requirements, how can MFIs ensure sustainable access to funds during this transition, and what innovative financial mechanisms can be explored to meet evolving market demands?

Session 3: Traversing the new regulatory framework for Microfinance - experience of the MFIs so far

In the wake of the Reserve Bank of India's 2022 new regulatory framework for Microfinance, the sector has undergone significant operational adjustments. This new framework, garnering widespread stakeholder approval, introduces uniform regulations for diverse entities and establishes an equitable landscape for Microfinance Institutions (MFIs) in comparison to banks. While fostering a level playing field, the framework mandates additional scrutiny in loan appraisal and pricing. Boards of the MFIs now shoulder a significant role in determining loan costs and appraisal mechanisms. The new regulatory framework also underscores the critical role of self-regulatory organizations in upholding market integrity and ensuring responsible financial practices.

• ● How have Microfinance Institutions adjusted their operational strategies and structures to align with the new regulatory framework introduced by the Reserve Bank of India in 2022?
• ● In the context of uniform regulations, how can Microfinance Institutions strike a balance between adhering to regulatory provisions and maintaining flexibility to cater to diverse regional needs?
• ● What specific challenges and opportunities have arisen for MFIs in implementing the additional requirements for loan appraisal and pricing, and how have boards navigated these complexities?
• ● How can Microfinance Institutions effectively balance the diverse array of credit products, ensuring they meet the varied needs of clients?
• ● How can boards of Microfinance Institutions proactively adopt responsible roles in the decision-making process regarding loan pricing, ensuring fair practices while meeting financial sustainability objectives?
• ● Considering the role of self-regulatory organizations, what mechanisms and best practices can be implemented to uphold market hygiene and ensure ethical conduct.

Session 4: Supporting smaller MFIs through innovative funding choices and facilities

Smaller and localized Microfinance Institutions (MFIs) play a crucial role in fostering financial inclusion. These institutions directly cater to local communities, reaching clients often overlooked by larger counterparts. Notably, their repayment rates excel in challenging circumstances, showcasing resilience. Smaller MFIs exhibit flexibility, tailoring financial solutions to specific community needs, fostering trust and ensuring a personalized approach. Their close-knit nature encourages innovation, addressing unique challenges. Despite their significance, these MFIs struggle to secure funds from traditional sources, necessitating exploration of innovative funding avenues. Permitting them to accept deposits, with appropriate safeguards, could enhance sustainability and further empower these vital financial catalysts at the grassroots level.

• ● Which of the SDGs can be impacted when we promote smaller MFIs? Promotion of smaller MFIs could potentially impact SDG 10 (Reduced inequality), SDG 1 (No Poverty) and SDG16 (Peace, Justice and Strong Institutions) significantly.
• ● How can the unique advantages of smaller and localized Microfinance Institutions be leveraged to enhance financial inclusion on a broader scale?
• ● The smaller MFIs face challenges in raising funds from traditional sources. What innovative funding mechanisms could be explored to ensure their sustainability and continued impact?
• ● What safeguards and regulatory frameworks should be put in place to ensure the stability and integrity of these institutions while expanding their funding sources?
• ● How can smaller Microfinance Institutions strengthen their institutional capacity to effectively respond to the dynamic financial needs of their local communities?
• ● In expanding beyond income generation loans, what strategies can MFIs employ to promote awareness and uptake of products such as deposits, insurance, and pensions among their clientele?

Session 5: Journey through Digital Transformation in Microfinance and application of Personal Data Protection Act

In recent years, Microfinance Institutions (MFIs) have undergone a digital transformation, replacing traditional paperwork with digital tools like tablets and mobile phones. Substantial investments have been made to digitize operations, aiming for expense optimization and improved risk management. Transactions are now predominantly conducted through bank accounts, and electronic signatures validate documents. This has resulted in significant changes in the manner in which the clients of Microfinance Institutions transact with them. The key questions which will be deliberated upon by the participants in this session will include

• ● How has the transition to digital operations impacted the overall client experience with Microfinance Institutions, and what positive outcomes have been observed?
• ● Considering the emphasis on data protection under the Personal Data Protection Act, what measures have been implemented by MFIs to safeguard client data and financial transactions in the digital landscape?
• ● In adopting digital tools, what challenges have MFIs encountered in ensuring equal accessibility for all clients, particularly those in remote or underserved areas?
• ● How can MFIs effectively address any resistance or barriers faced by clients in adapting to digital transactions and electronic signatures?
• ● In what ways have clients benefited from the optimization of expenses through digital means, and how can MFIs continue to enhance the client experience in the evolving digital era?
• ● What role does financial literacy play in enhancing the well-being of clients, and how can MFIs integrate and optimize financial education services within their offerings?

Session 6: Power of networks: Sharing of Global Experience by practitioners

Microfinance initiatives worldwide strive to achieve diverse social goals, with each country adopting innovative practices that shape unique experiences. Exchange of these experiences across borders can foster a virtuous cycle of learning and improvement. By emphasizing shared insights, challenges and successes, the transformative potential of microfinance on a global scale is highlighted. This collaborative approach underscores the collective power of knowledge to drive microfinance towards heightened impact and inclusivity, navigating new frontiers in the pursuit of sustainable social development. In this session delegates from other countries will be invited to share their experiences. The key questions which will be highlighted in this session include

• ● What has been the global experience of Microfinance in contributing to the Sustainable Development Goals (SDGs)?
• ● How have diverse cultural contexts influenced the implementation of microfinance practices in different countries, and what lessons can be drawn from these variations?
• ● In the pursuit of social goals, what innovative practices have proven successful in specific regions, and how can these experiences be adapted and shared globally?
• ● What challenges have practitioners faced in implementing microfinance initiatives across borders, and how can a collaborative approach address these challenges more effectively?
• ● How can the global sharing of experiences in microfinance contribute to the development of best practices and enhance the overall impact on communities?
• ● In building a virtuous cycle of learning and improvement, what strategies can be employed to encourage continuous dialogue and knowledge exchange among microfinance practitioners from various countries?
• ● In the context of social impact, how can MFIs measure and communicate the positive outcomes of their diversified product offerings on the broader social security and economic well-being of their clients and communities?

Scenario in West Bengal: West Bengal has always been one of the pioneers of microfinance in India. It had always contributed significantly to the understanding of microfinance practices across the country. Even today, in terms of loan portfolio, West Bengal is only second to Tamil Nadu, accounting to around 12.4% of total loan portfolio in India. West Bengal also accounts for 10.4% of active loans in the country. Six out of top 10 districts in India, in terms of loan portfolio outstanding, also come from West Bengal (North 24 Parganas, Murshidabad, Jalpaiguri, Nadia, South 24 Parganas, Bardhaman)

In West Bengal, this industry (among the AMFI-WB Members i.e. MFIs and Banks) directly employs at least 33,000 people and most of them are from low income families with limited educational qualifications with total investment of 28642 Crores as loan outstanding as on March 2023. The MFI segment created huge micro and small entrepreneurship in the state, covering more than 7.8 million women who are mostly from the underprivileged segment. The government needs to be more proactive in terms providing safeguards to this industry in matter of issuance of trade license, shop and establishment registration and other compliance processes. We may seek a single window option for trade licenses and shop and establishment for a one time fixed fee per branch.

Scenario in Eastern India as well Pan India level:

As on 31 March 2023,

Universe highlights

• ● As on 31 March 2023, 82 NBFC-MFIs hold the largest share of portfolio in micro-credit with Gross Loan Portfolio (GLP) of Rs 1,38,310 Cr, which is 39.7% of total micro-credit universe
• ● Banks are second largest provider of micro-credit with a GLP of Rs 1,19,113 Cr, accounting for 34.2% to total industry portfolio
• ● SFBs have a total GLP of Rs 57,828 Cr with total share of 16.6%
• ● The overall YoY (31 March 2022 to 31 March 2023) growth of GLP is 22.0%
• ● As on 31 March 2023, 3.9 Cr clients have loan outstanding from NBFC-MFIs, which is 20.0% higher than clients as on 31 March 2022.
• ● The Asset Under Management (AUM) of MFIs is Rs 1,31,163 Cr as on 31 March 2023, including owned portfolio Rs 1,07,232 Cr and managed portfolio (off BS) of Rs 23,931 Cr. The owned portfolio of MFIN members is about 77.5% of the NBFC-MFI universe portfolio of Rs 1,38,310 Cr.
• ● On a YoY basis AUM has increased by 38.7% as compared to 31 March 2022 and by 15.7% in comparison to 31 December 2022.
• ● Loan amount of Rs 1,30,563 Cr was disbursed in FY 22-23 through 3.1 Cr accounts, including disbursement of Owned as well as Managed portfolio. This is 59.3% higher than the amount disbursed in FY 21-22.
• ● Average loan amount disbursed per account during FY 22-23 was Rs 42,010 which is an increase of around 12.9% in comparison to the last financial year.
• ● As on 31 March 2023, the borrowings O/s were Rs 97,420 Cr. Banks contributed 60.3% of borrowings O/s followed by 22.2% from Non-Bank entity, 9.3% from AIFIs, 4.1% from other sources and 4.1% from External Commercial Borrowings (ECB).
• ● During FY 22-23, NBFC-MFIs received a total of Rs 74,787 Cr in debt funding, which is 59.2% higher than FY 21-22. Banks contributed 69.2% of the total Borrowing received followed by Non-Bank entities 21.0%, AIFIs 6.7%, ECB 1.8% and Others 1.3%.
• ● Total equity increased by 25.4% as compared to end of Q4 FY 21-22 and is at Rs 26,332 Cr as on 31 March 2022.
• ● Portfolio at Risk (PAR)>30 days as on 31 March 2023 has reduced to 4.0% as compared to 9.7% as on 31 March 2022.
• ● MFIs have presence in 27 states and 5 union territories.

Some of the key discussion points to understand the microfinance industry nationally as well in Eastern India Perspective:

The following are the most important issues to consider to further increase the resilience of the microfinance sector and creating enhanced value for the under privileged sections of the society.

• ● The government should further increase the funding and liquidity support to the sector particularly the smaller MFIs.
• ● The interest rate calculation formula specified by the RBI will prevent lenders from enjoying huge margins and especially banks, which have low-cost deposits, will be discouraged from charging the same rate as the MFIs. But should insurance charges be included for pricing micro loans? Most of the customers in this segment are not insured and death rates are high. Inclusive of insurance charges, the interest rates will be high, which may not be politically palatable. The calculation of internal rate of return, or IRR, for a lender should exclude insurance though it should be mandatory to declare it.
• ● India’s microfinance industry is at a crossroads now. The Covid pandemic has wreaked havoc and many of them have restructured between 10 and 30 per cent of loans; and gross bad loans could be in the range of 5-15 per cent. The micro, small and medium enterprises have got the benefit of the government’s Emergency Credit Line Guarantee Scheme but the MFI industry caters to very few of them. Reducing exposure to unsecured loans from 85 per cent to 75 per cent will be of little help. If the regulator wants to make the segment resilient, it should drop it to 60 per cent.
• ● Finally, cash collections of micro loans run into thousands of crores a month. Shouldn’t the RBI look for a differential pricing for digital offerings? That will help speed up digitisation in this segment.
• ● Apex financial institutions like SIDBI and NABARD need to further enhance equity and loan support to the MFIs particularly the smaller ones.
• ● Investment in client education needs to be enhanced to increase productivity of their businesses and enable them to take advantages of the available opportunities
• ● There is scope to further support the MFIs in improving their capacity to develop more products and understand needs of the clients better.
• ● The Government should further increase the funding and liquidity support to the sector particularly the smaller & medium sized MFIs like continuation of CGSMFI scheme for another 2 years.
• ● Apex financial institutions like SIDBI, NABARD and MUDRA need to further enhance equity loan and long term sub-ordinate debt support to the MFIs particularly the smaller ones in line with IMEF Fund as earmarked in earlier budgets.
• ● More & More ‘Financial Literacy Workshop’ for Clients may be organized so that they can embrace the digital transactions more freely. Capacity Building support is also required.
• ● It is high time for the Government to create ‘Microfinance Regulatory Authority’ exclusively for regulating and promoting NBFC-MFIs.
• ● Creation of an ‘Autonomous Finance Corporation’ for MFIs that may address the problems of liquidity of Small & Medium sized MFIs
• ● Creation of special window by the Banks for funding of NBFC-MFIs & special budgetary allocation for this purpose.
• ● Regulators have prescribed guidelines for responsible lending but there is no such guidelines related to responsible borrowing. Code of Conduct for responsible borrowers may also be framed forthwith.
• ● Rating & Grading agencies must formulate separate guidelines of rating / grading for Small & Medium sized MFIs.

For further details:
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Manit Singh@ 9831980806