Indian Microfinance: what holds back the
Till the start of the 18
century, India con-stituted over 35% of the world trade. To-day with over 400 million people comingunder the BPL, India alone constitutes over
35% of the world‟s poverty. Thanks to our
colonial past which rendered the otherwiseworking classes useless and in most of thecases wage labourers.The objective of the entire British educationsystem propagated by Macaulay was to pro-duce clerks for British Administration whichthey successfully achieved. Scientific tem-
perament which was Indian psyche‟s main-
stay was pushed back. The new system dis-couraged the very notion of thinking whichresulted in no major scientific breakthroughfrom India during that period. There havebeen aberrations but those had been far andbetween. Proof of that is so little number of patents issued to Indian compared to tinycountries like Taiwan and Japan. We are yetto come out that phase as have not thought itworth while to change ur education systemand bring back the glorious past. The so
called temples of Modern India, (IIT‟s and the
IIMs) are some of the efforts in the right di-
rection but it‟s too little too late. The entire
system needs to be restructured to bring theinnovative minds at work.Putting aside the entire blame on theory, anyclassical economist would tell that rationalhuman being or entity performs according tothe incentive system. So we need to go intothe rationale behind low level of innovations.
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individual lendingGrameen Bank Model
JLG based lendingIt comes as no surprisethat India chose the sec-ond model because itsuited the cultural envi-ronment and sensibilities.But what comes as a sur-prise that it took almost14 years before any Indianentrepreneur thought of replicating the model.entrepreneur thought of replicating the model.Though there have been inno-vations on the delivery sidelike working only with womenand working strictly with thegroups but very few innova-tions on the products and cus-tomer service.
So let‟s see what are the costs
involved in innovating?Though the SHG Model of Microfinance was started inIndia, the various constraintsinvolved with it have limitedits growth or replication inother parts of world. This leftthe case open for Indian En-trepreneurs to replicatingothers models of microfi-nance which had two preva-lent models in worldLatin American Model
branch based banking/
"Perfection is achieved,not when there is nothing left to add, but whenthere is nothing left toremove."