BISWA: Fostering Inclusive Growth through Microfinance (Abridged)
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Case Code: BSTR392 Case Length: 19 Pages Period: 2004-2010 Pub Date: 2011 Teaching Note: Available |
Price: Rs.500 Organization: BISWA Industry: Microfinance Countries: India Themes: Inclusive Business Models, Entrepreneurship, Social Entrepreneurship, Inclusive Growth |
Abstract Case Intro 1 Case Intro 2 Excerpts
Microfinance in India
It was another hot and humid day at Sambalpur, a town in the eastern Indian state of Odisha.1 It was the end of June 2010. Khirod Chandra Malick (Malick), Chairman, Bharat Integrated Social Welfare Agency (BISWA), had called a meeting of the senior management team of the organization's microfinance program.
Going through the progress reports of BISWA's microfinance program Malick noted that between 1994 and mid-2010, the microfinance program had grown significantly and expanded to 16 states. Along the way, the organization had overcome various challenges. Initially operating as a social service organization that also provided micro-credit to poor people, BISWA had since adopted an integrated approach to bring about a convergence between microfinance and micro-enterprise development, micro-marketing, micro-insurance, and other social development initiatives. It also floated a Non Banking Financial Company (NBFC) to focus solely on microfinance.
Till mid-2010, BISWA's microfinance program had directly touched the lives of 4,015,240 people. Malick's aim was to ramp up BISWA's presence to cover nearly all the states of India by the end of 2012. However, he knew that achieving that would not be easy as Microfinance Institutions (MFIs), particularly mid-sized and MFIs such as BISWA, had to face several challenges, and this despite the fact that the microfinance sector in India was showing positive trends. The theme for the brainstorming session was:
"How do we strike the right balance between our mission of social development and financial sustainability as a social organization and as a MFI?"
Microfinance, which involves offering a range of financial services to the poor, entails mobilization of savings, extension of small loans, micro-insurance, and capacity building of the beneficiaries. The loans, usually in the range of Rs.2 5,000 to Rs.20,000, are meant for the vast majority of people in developing countries such as India who had traditionally been considered non-bankable. In the Indian context, most of the microfinance service providers are involved in extending only micro-credit. India, despite having one of most widespread banking infrastructures in the world, had, millions of people who, even in till mid-2010, did not have access to basic banking services such as savings and credit.
In the mid-1990s, about 70% of India's population lived in the rural areas, which accounted for only 30% of the bank deposits. About 70% of the rural poor did not have bank accounts and 87% of them did not have access to credit from banks. In the same period, the share of non-institutional agencies including traders, money lenders, friends, and relatives in the outstanding cash dues of rural households was 36%. The situation among the urban poor was not much better...
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