The microfinance environment in India is changing. MFIs face new regulatory guidelines and more cautious banks and investors. This has led them to re-commit to client-centered products and approaches.
National Bank for Agriculture and Rural Development’s (NABARD) SHG II calls for strengthening SHPIs and self-help groups (SHGs), and improving financial products and linkages with banks for their members.
2. CONTENTS
1. Definition
2. Introduction
3. Structure of MFI
4. Self help groups
5. Micro-financing ecosystem
6. Crises and evolution
7. Functions
8. Health interventions and
programs
9. Evidence of impact
10. Future research
11. References
2
3. DEFINITION
Microfinance is defined as, financial services such as savings accounts,
insurance funds and credit provided to poor and low income clients so as to
help them increase their income, thereby improving their standard of living.
3
4. INTRODUCTION
Platform for reaching the poor with vital health information, products, and services.
Regularly educate its members on a wide range of health topics
Some run health camps, have established health clinics or innovative partnerships
connecting microfinance service users with healthcare providers (Telemedicine).
Offer healthcare financing through health loans, health savings and health insurance.
Renewed focus on social performance throughout the sector.
It is dealing with one of the biggest barriers to economic advancement of the poor:
ill health.
4
5. Indian microfinance is characterized by two dominant models:
The self-help group (SHG)-bank linkage model and
The microfinance institution (MFI) model.
Differ each other,
In delivery methodology
Legal forms of institutions involved in service delivery.
5
6. MFIs and SHGs have achieved significant impacts in areas like:
Neonatal and Maternal Mortality and Infant and Child Feeding.
Rigorous cost studies have demonstrated the low marginal costs of MFIs in
providing health services.
However, the microfinance sector cannot be a substitute for the health system.
But where tens of millions lack access to health information, services and
financing, the microfinance sector—with its vast and regular contact with the poor—
can go a long way to fill the gaps.
6
8. SELF-HELP GROUPS
SHG-Bank Linkage Program (SBLP) is promoted by the National Bank for
Agriculture and Rural Development (NABARD).
NABARD played a very important role in conceptualizing, designing and promoting
the SBLP.
SHGs small informal groups of 10–20 individuals (mostly women)
Promoting savings habits among members.
The internal savings mobilized by the group are lent to its members for emergent
needs or such purposes as decided by the group.
When groups are able to successfully manage their savings and lending portfolio,
banks step in to finance the groups.
8
9. “SHG2.” Some of the important changes include -
• Encouraging voluntary savings.
• Allowing a cash credit/overdraft system of lending to enable SHGs to be flexible in
meeting their emergency needs and help them reduce the cost of borrowing.
• Allowing SHG members who are in a position to expand economic activities that
require higher levels of loans to form Joint Liability Groups (JLGs) for the purpose of
availing bank loans against mutual guarantees.
• Allowing well-functioning SHGs and NGOs to be engaged by banks as Banking
Facilitators.
9
11. 1. External stakeholders
a. Customers
b. Lenders and investors
c. Partners
d. Industry associations
e. Regulators
Entire landscape is divided in the
form of relevant stakeholders.
11
2. Internal stakeholders
a. Operations
b. Risk management
c. Technology
d. Human capital
12. CRISES AND EVOLUTION
As institutions scaled up quickly
Hiring and training processes were less
thorough
Employees indulged in inappropriate
collection practices
Customer over-indebtedness.
12
13. 13
Jan 2010 – 9.2 million borrowers in AP in default on MFI loans,
largest number of defaulters in any single location in the world.
Oct 2010 – AP crises strikes; state issues ordinance to regulate
MFI sector while banks shun MFI companies.
Jan 2011 – RBI releases Malegam Committee
regulations.
May 2011 – RBI issues norms for categorization of bank
loans as priority sector loans
Dec 2011 – RBI introduces new
category of NBFC MFI
14. Aug 2012 – RBI to be the sole
regulator for the microfinance
industry. 14
Aug 2012 – margin cap revised to
10% from 12%.
Apr 2013 – Malegam recommendations fully
implemented and industry back on the growth path
Mar and Apr 2015 – Mudra bank announced;
RBI eases lending norms for MFI companies.
Sep 2015 – small finance bank license
awarded to 8 MFI companies.
15. Area Prior to the AP ordinance Post the AP ordinance
Registration All non-government organizations
and financial institutions were free
to operate
Compulsory registration with the district
authorities for every district of operation
Interest rates No specified interest rate structure
or caps and no restrictions on fees
Only interest can be charged to customers.
Interest rate needs to be informed to
customer explicitly. Interest charged
cannot be higher than principal.
Executive liability No framework Direct liability of CEO for any lapse in
operations at all levels (including
branches)
Customer origination No restriction No member of an SHG can be a member
of any other SHG/MFI
Recoveries and
collections
Recoveries possible at the doorstep
of the borrower
Recoveries possible only at central
locations
MFI REGULATIONS POST AP ORDINANCE
15
16. MFIs are now efficient and client friendly
Adherence to the Common Code of Conduct (CoCA)
Transparency is the key
Indian microfinance is resilient
16
17. FUNCTIONS
Apart from compelling business reasons MFI attend to their clients’ health needs, and
serve as trusted intermediaries between community members and the outside world.
Reach clients with simple and effective health interventions.
Timely and disciplined group meetings are coordinated around the collection and
accounting for savings and credit transactions.
17
18. They change knowledge and behaviors that are known to reduce the incidences of the
most common and preventable diseases.
MFIs and SHGs with their financial-service capacity are also viable channels for
linking MFI and SHG clients with health micro-insurance, as well as to other financing
tools. such as savings and health loans.
A growing body of evidence from around the world indicates that when health and
financial services for the poor are linked in a systematic and cohesive manner, key
barriers to health for the poor can be reduced.
18
19. ROUTINE GROUP MEETINGS
Well-designed health education
Mostly for women between the ages of 20 and 45,
Effective platform to promote and address health services as:
- Institutional delivery, care for newborns, contraceptive use, under-nutrition
among children, anemia among women and girls, hygiene and sanitation.
19
20. HEALTH INTERVENTIONS
High potential for a low-cost and sustainable way to reach poor families with simple,
but important health interventions like :
I. Programs to address client awareness about preventive and promotive health care
II. Programs to address financing cost of treatment.
III. Programs for access to healthcare products and services at doorstep
20
21. HEALTH INTERVENTIONS PROVIDED BY MFI
Health Education
Group
Individual
Health Promotion
Healthcare Services and Products
Direct Delivery
Contracts with Healthcare
Providers
Negotiated Discounts
Referrals
Mobile Health
Community Health Workers or
Volunteers
Distribution of Health Products
Telemedicine
Financial Products
Health Loans (Individual)
Health Loans (Group)
Health Savings
Health Micro-insurance
21
22. HEALTH NEEDS ADDRESSED BY MFI HEALTH
PROGRAMS
1. Maternal Care
2. Childhood Illness
3. Malnutrition
4. HIV/AIDS
5. Hygiene and Sanitation
6. NCD
7. Adolescent care
8. Malaria
9. Respiratory Illness
10. Others: Dental, Ophthalmic,
Family Planning
22
23. PROGRAM EXAMPLES: Improving health knowledge, behaviors
and access to care
Health information through education
Ekjut: Empowering women to reduce infant and maternal mortality
Bandhan: Community-based health education.
Access to appropriate and affordable health services and products
Equitas and Apollo Hospitals: Telemedicine centers
NEED and FHI 360: Increasing access and use of family planning methods
Gram Utthan: Affordable healthcare products at the doorstep
Financing for health
SERP: Health savings, loans and micro insurance
Spandana and PATH: In-home water filtration devices
BISWA: Loans for mosquito nets
Fully integrated solutions
SEWA: Integrated healthcare delivery and financing by and for women
ICTPH and Sughavazhvu Health Care: Managed care for rural communities
23
24. MFIS REPORTING ACTIVE HEALTH PROGRAMS
Bandhan (West Bengal)
BWDA (Tamil Nadu)
Cashpor (Uttar Pradesh)
Community Development Society (Maharashtra)
ESAF (Kerala)
Equitas (Tamil Nadu)
Gram Utthan (Odisha)
Gram Vidiyal (Tamil Nadu)
Kajila Janakalyan Samiti (West Bengal)
Kotalipara Development Society (West Bengal)
Mahasemam Trust (Tamil Nadu)
NEED (Uttar Pradesh)
Nidan (Bihar)
OAZOANE (Tamil Nadu)
PioneerTrad (Tamil Nadu)
PMD (Tamil Nadu)
SERP (Andhra Pradesh)
SKDRDP (Karnataka)
Star Youth Association (Andhra Pradesh)
24
25. EVIDENCE OF IMPACT OF INTEGRATED
HEALTH AND MICROFINANCE IN INDIA
Improved health knowledge and behaviors related to maternal and child
health
Improved financing to protect health and improve awareness and use of
services
Improved access to healthcare products and services
25
27. 27
Combined health and financial services through
microfinance women’s group
Social and
political
empowerment
Health
education
Health
education
Loans for
improved
water source
Loans for
bed nets
Home visits
to counsel
mothers
Home based
neonatal care
Access to
products and
services
Appropriate
care seeking
Health
insurance
Health
savings
Expanding
coverage
Awareness
about
entitlement
28. Areas for future research
Large-scale effectiveness studies with active support and involvement of Indian public
health policy planners, particularly the Department of Health Research.
Establish contextual factors that affect the work of MFIs and SHPIs on health
knowledge, behavior and service-use related measures.
Factors influencing uptake at both the individual and institutional levels, including costs
and client satisfaction are key research priority areas.
28
29. REFERENCES
1. Somen Saha, D.S.K. Rao; Integrated Health and Microfinance in India, Volume
II: The Way Forward; state of the field 2014.
2. Marcia Metcalfe, Somen Saha, D.S.K. Rao, Kathleen Stack, Anna Awimbo;
Integrated Health and Microfinance in India: Harnessing the Strengths of Two
Sectors to Improve Health and Alleviate Poverty; State of the Field of Integrated
Health and Microfinance in India, 2012.
3. PwF; Shifting trends in the microfinance ecosystem November 2016.
29
The microfinance environment in India is changing. MFIs face new regulatory guidelines and more cautious banks and investors. This has led them to re-commit to client-centered products and approaches.
National Bank for Agriculture and Rural Development’s (NABARD) SHG II calls for strengthening SHPIs and self-help groups (SHGs), and improving financial products and linkages with banks for their members.
While the MFI model is growing rapidly, the SHG-Bank linkage model is by far the more dominant model in terms of outreach.
The MFI model is privately managed with some institutions regulated by the reserve bank of India (RBI)
SHG-bank linkage model is implemented by non-governmental organizations (NGOs) and the state governments.
Quality of group functioning is the prime criteria banks use when deciding to lend. To become eligible to receive a bank loan, groups that need to have operated for about six months and have successfully undertaken savings and credit operations from its own resources while maintaining proper records.
As per District Level Household Survey (DLHS 3) data, 57.9 percent of Indian villages have an SHG (southern and northeastern India).
This period was also characterized by lack of regulation on pricing, lending, and recovery practices.
The combination of lack of regulation and rapid sector growth resulted in an environment where customers were dissatisfied with microfinance services.
Reserve Bank of India acted with alacrity
These regulations, however, did not ease doing business. Instead, they raised operational difficulties and virtually brought MFIs to a halt in the state of AP, the hub of MFIs in India. The risk remained that other states would not follow suit and formulate their own regulations, thereby spoiling the credit culture
MFI management approach, services and performance are influenced by their legal form, ranging from not-for-profit societies or trusts and not-for-profit companies registered with non-banking financial companies (NBFCS) licensed by RBI (Sinha, 2009).
Promising evidence and examples in India suggest that MFIs and SHGs can improve client access to and use of affordable health services and products.
Health education could also support other interventions that MFIs and SHGs can design and implement that link families to appropriate healthcare services and products, and help to finance health services and manage the impact of health shocks.
Experience with pioneering MFIs and SHGs in India shows that once a financial service organization has developed and piloted an efficient and effective health program, the program can be expanded to very large numbers of people at low cost to the institution and with significant positive impacts on clients and the financial service organization itself.
Programs to address financing cost of treatment such as the mandatory pilot health-insurance program of SKS microfinance that offered cashless maternity, hospitalization and accident benefits among network hospitals to its members
including both process and outcome indicators of maternal and infant health, child nutrition and health, and water and sanitation.