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Volume.1 The IIFM newsletter September,2007

Microfinance in Africa – Fuelling Growth

From The Sidelines The Editor‟s Ennui... and Bridging Financing Gap

“Unveil the Shakti within." The main hurdle to growth in Af-

Behold Sampark, yet again – the
That‟s the message renowned econo-
connection point – which has always proved rica is financing gap. Millions of people do
mist and former Indian Ambassador
to the US, Padma Bhushan Dr Abid to be a Sisyphean task to sustain… as also not have access to services like deposits
Husain had to give IIFMites. In a to quell. That‟s how you see this idiotic and small loans, taken for granted in richer
speech that marked the beginning of
group of IIFMites burning away the mid- countries. Those who do have access to
the Institute's silver jubilee cele-
brations, Dr Hussian spoke about 60 night oil, not in gratifying acts of erudition, credit in Africa tend to be predictably
years of Indian independence and the but in unrequited efforts of article- similar: international companies, multi-
road that lay ahead. Layered as the lateral organizations, high end local organi-
solicitation! You see, there‟s a general iner-
speech was with deep spiritual wis-
tia among human beings which resists ex- zations, rich individuals and the public ser-
dom and personal anecdotes, the
effect is difficult to recreate. How- traneous needs unless they transform into vants. To open an account, one needs to
ever, here are the highlights -
motivators (implication intended!). We, the deposit more than US$ 1000. However a
Celebrating 60 years of a poor members of the not-yet-formal Com- host of microfinance organizations in Af-
country that is thousands of years rica are helping to bridge the gap. The good
munications Cell, don‟t have the resources
old: Many came and conquered our
to dangle a carrot, and definitely can‟t news is that they are growing in number.
land and our wealth, but India‟s spirit
remains unconquered. “We did it brandish a stick now, can we? Savings tend to make up the majority of
from scratch,” is what Dr Hussain their business, with roughly three times as
had to say. India at the time of inde- But there‟s a wide gamut of things
many savers as borrowers, bucking the
pendence, was an India whose people to be shared – by everyone – the faculty,
suffered from poverty, illiteracy and global trend. East Africa dominates the
the alumni, and of course, the students.
hunger. "The middle class today had scene, with two large Ethiopian micro fi-
forefathers who were below the Aren‟t we all interested in the various ar-
nancing institutions- The Amhara Credit
poverty line. You and I are children eas that alumni are working, their applica-
of forefathers
and Savings Union and the Debit Credit and
tions of IIFM learning? Aren‟t we all inter-
who have struggled Savings Institutions, as well as the huge
to establish them- ested in knowing something more from the
Kenya Post Office and Savings Bank. South
selves. Why can't faculty about their area of specialization,
Africa‟s TEBA Bank is the behemoth in
we do for the 600 beyond the academics? And finally, aren‟t
million poor today Southern Africa, its gross loan portfolio
we all interested in the goings-on in the
what we could do accounting for nearly a quarter of out-
for the 300 million campus and the various idiosyncrasies of
standing loans on the continent. West Af-
poor then?" the students (like the e-wars which rup-
rica is well served by a significant number
ture at the drop of a hat… Students might
The spirit of India: “We of smaller organizations, while in North
have in our veins, our body that spirit be next-door neighbours, but fight they
Africa success stories like Morocco‟s Al
of India that has always made it have to on the webmail, while maintaining
Amana have brought micro credit to the
great. The seeds are there, they just cordial relations face-to-face!)? Now don‟t
need to be cultivated,” he said. Dr forefront in the fight against poverty.
say “No” just to spite me.
Hussain gave the example of the
However there are some thorny
noble laureates from the US whose So here‟s Sampark… for each one
research has been supported by problems in African microfinancing. One is
Indians, of our doctors whose healing of you. You will see a reflection of your the poor return on investment that these
touch makes the sick and ailing fly ideas here, a new angle even. But for that, organizations yield. Though financial reve-
across the seven seas to receive
medical help in India, of the Industry
YOU need to contribute... the clichéd time, nue is strong, the cost of running the op-
that is making its mark across the energy and resources. Most importantly, eration often bites too deep into profits.
world. For example, Indian Ocean MFIs. Have the
your interest. Or else, be prepared for an
overdose of still more pertinacious re- highest regional revenue of 28%. High op-
“When India rises, you
rise with it, when India falls you fall quests and drab-reading e-junk! erating cost, however, bring the return on
with it. Think of India first, work to the capital outlay
make India first,” were his conclud-
ing words.
(Siddharth Iyer) (… contd.)
Volume.1 Page 2

down to -3.3%. Why? The weak communication and trans- lined operations and higher profits, there are many com-
port infrastructure, high labour costs and a poorer rural mercial banks who are eyeing the market.
market all make it hard to breakeven, this is reflected by
The intellectual support for this was added by
the lack of global interest in the sector. Research in 2004
Prof. S L Hart and C K Prahalad‟s work on the business para-
by the CGAP (Consultative Group to Aid the Poor) found
digm of exploiting the developing markets found at the
that African MFIs attract only 6% of total global invest-
„bottom of pyramid‟. This has alarmed some, who suspect
ment from international financial institutions and privately
the motives of large corporations and the whole idea of
managed funds.
inclusive capitalism. In addition, there is a school of thought
Nevertheless, things are changing and many of the that claims it is not possible to act in a socially responsible
costs are being eroded by new technology. E-banking and and positive manner, while maintaining a viable commercial
branchless microfinance are being pioneered by TEBA bank edge. But there are outfits like ProCredit Bank, who manage
of South Africa, with terminals in remote village shops at not only to survive but to thrive on this challenge. These
which people can access their accounts. This means that an companies are using clear economies of scale present in the
account officer does not have to make the 200 km journey African market to overcome hurdles to profitability like
across difficult terrain and attend the weekly progress infrastructure and unlike many NGOs they have integrated
report, and bank doesn‟t have to create and maintain a new the deposits and credits sides of their operations.
building, with all the capital outlay that entails. Mobile
But there are some serious points which warrant
phone technology is being used to carry out simple banking
attention and everything is not rosy. Many of those who
transactions like SMS purchasing, and the Opportunity In-
have received micro-credit loans in the past have failed to
ternational Bank of Malawi has been using smartcards as an
utilize it properly. It is unfeasible to assume that everyone
efficient and reliable way of identifying customers, dis-
is a potential entrepreneur. More focus should be on those
pensing with paper work and speeding up the number of cus-
who have already proved that they have a flair for business
tomers that can be served by a banking official. The condi-
and have a small up and running operations as they have
tions of mobile phone growth across Africa are met, and
much greater potential to create jobs and trigger wide-
systems have already been tested and implemented.
spread economic development.
Something else that will help lower costs and
sharpen the profile of microfinance is the move towards
better regulations in the industry. Many MFIs in Uganda Santosh Singh (2006 Batch),
have taken advantage of new legislations to become regu- Currently working with CDF-IFMR, Chennai
lated financial entities. This makes sense for several rea-
sons. It allows them to take the money given in savings by
their clients and use it to finance the loans, one of the core
features of commercial banks. The Bank of Uganda has ap-
proved licenses for the four largest MFIs (FINCA, PRIDE,
UMA and Uganda Finance Trust). The success of these in-
stitutions is bound to attract big commercial banks to
downscale. The Sampark Team
Regulated MFIs in Africa grew form 51-66% in
terms of savers and borrowers between 2001 to 2003, ac-
cording to a survey by the Microfinance Exchange. The also Editor: Siddharth Iyer
maintained their profitability at over 3% while the African
average was negative at -0.6%. Regulated MFIs are also the
Core team: Aakansha Sethi,
most productive MFIs, with 177 borrowers and 202 savers
per staff members. Kanika Chandel, Rewasa, Shweta
The Vice President of the Asian Development Bank,
Bhagwat, Ashish Thekkekara,
Geert Van Der Linden, believes “Given the large and growing Mohan Reddy, Pankaj Chauhan,
demand, the only way to sufficiently increase the supply of Siddharth Iyer.
micro-finance is through commercialization.” So attracting
private sector is key. The graduate scheme at Pretoria is Send in your contributions to:
one example where useful African managerial talent is de-
veloped and used to bring information and experience to the
area, helping to turn successful, regulated MFIs into suc-
cessful commercial microfinance banks. Thus with stream-
Volume.1 Page 3

Thinking about you... “Sampark revived to build our social capital”

Sampark means “connection”, and we at IIFM want to

develop relations with everyone connected to it – to share the
It isn‟t a new feeling and, yet
happiness, sorrow, good, bad and ugly news. That‟s how Sampark
It has a strange freshness was launched initially and it garnered good response and feeling
Why, in spite of such a strong will among alumni and the students at campus. However, the fine
thread of relationship (in the word of Hindi Poet Rahim – Rahiman
I find myself so helpless? dhaga prem ka) developed through Sampark somehow weakened.
The passion which I feel for you Sharing the IIFM goings-on stopped. The same thing applied to
alumni whereabouts. A void was created. The present batch of
Has not been felt for ages.
students, after realizing the significance of this relationship,
Stronger it is than that for freedom decided to extend the cord for re-bonding.

For the birds in cages. All those working in the management area know the im-
portance of social capital. It speaks of networks, norms and sanc-
With eyes bent towards the earth, you look like
tions in a community and among its members for reaping more
A damsel from the skies. benefits with lesser transaction costs. So as one of the partners
in the relationship we again take a step forward to link ourselves
It is truth that I seek, but it is to you
with you. The second element important in building relationships
That my heart flies. is reciprocity: it is important that the other partner recipro-
As I sit at my window staring at the evening star cates with the same enthusiasm to build the bond. Scholars say
that the social capital grows in strength with use and decays if in
It twinkles at me from the sky. disuse. Social capital has three sub types: bonding, bridging and
It reminds me, with all its beauty and enthusiasm, linking. Sampark wishes to develop the bond of brotherhood,
build the bridge of friendship and link the development of indi-
Of that spark in your eye.
viduals and the Institute together. So, I expect the alumni to
Do not you know, how much I desire come forward and extend their support, contribution and guid-
ance to the student group working on Sampark at IIFM. Let us
To hold your hand?
develop an ever lasting bond through Sampark and prepare a sys-
Even the crusaders desired less tem that can sustain it for a long time.
To conquer the holy land. I would like to inform our readers that our Institute is
taking steps to bring changes in the arena of academics and re-
I know that not all desires are fulfilled,
search. Sampark will provide you with the opportunity to acquaint
Nor all wishes are granted. yourself with it and share your perspectives. This is one of the
Yet, o my beloved! I confess that it is aims of Sampark. I congratulate all those involved in this effort
and wish them good luck.
Your love that I have always wanted.
Dr. Amitabh Pandey, Chairperson, SAAC
(Rahul Bharadwaj-PFM‟08)

Teejan Bai @ the

Welcome Nite
for the freshers evening

Rappelling in Our new class-

full swing!
Volume.1 Page 4
All for 6 Indians….!!! System…But, seriously….

I never realized that 6 Indians could have such a Initially, I was astonished to know that my Commu-
huge impact on one evening of my life. Nor did I realize get- nication Cell members wanted me to write something for
ting 8 Indians together could be such a Herculean task. If something called Sampark! (don‟t miss the something.) I
you‟re wondering what the reason behind my woes is- here mean, I am there in this team but they know that all I know
goes my story- is that such a team exists! What we (they) do? How we
(they) do it? And why we (they) do it? I don‟t know!!!
I am currently working with Olam International and
am placed at Quelimane, Mozambique. While the name‟s ex- But there must probably be something worthwhile
otic- the town is very small. The pollution is negligible- in me despite the fact that there exists a whole concept
which is a good thing, but so is the population- which is not dedicated to me in B.O. called “Social Loafing” (I hate the
such a good thing- as I was to discover one evening. loafing part in the name, though!). I think people involved in
this holy act (Social @£$ %^&*) generally have all the time
Since entertainment is restricted to office, TV (where we
on Earth to observe, and therefore always have something
get 5 Indian channels) and occasional movies at the theatre
to write (even though pushed to do so).
(which thanks to I don‟t know who plays Hindi movies, good
ol‟ Bollywood after all ) - after a long day at work, my boss Take this committee for instance- my keen…or not
suggested going for the new movie (new by our standards, so keen observation has revealed the following- Aakansha
since movies that are 6 months old are played) and Ashish are always very excited about all meetings and
have so many ideas (in fact Ashish is all about ideas: he can
The movie‟s name was "Fool n Final", whose deeper
write a “101 ways to…” series on anything under the sun! I
connotation we were to discover at the end of the evening.
make sure I am not in their sight because when you are ide-
We rushed for the lone show which was to start at 8:30
ating, seeing someone yawn is a bad omen!
p.m., got into the „lets watch a movie mode‟- read buying
popcorn tickets and juice and settled down in our seats. Apart from accepting and rejecting the hypotheses
given by the above mentioned creatures, Rewasa acts as the
Then we waited...and waited. The blank screen which should
discipline in-charge. Every 20 seconds she tells one of us
have burst into colour and music mockingly looked down on
that you are going to get hit! (I ensure that there isn‟t any-
us. We started looking around hoping to locate the problem.
thing like a paperweight near her). Siddharth actually suf-
It was then that a guy from the ticket counter
fers from a constipation of ideas! He always has an expres-
came up to us with a face sad enough to
s i o n similar to having something to say, but being
match Meena Kumari‟s, returned our
stopped by some evil force
money, and said that there would be no
(at least he has something to
screening that day!
The reason? Their screening cri- teria,
Mohan is fascinated with
which required at least 8 people for a show, while we were
PowerPoint and believes that every inter- and intra-planet
only 3! Surprised, we started looking for the 3rd guy and
information exchange should take place through PowerPoint
found him to be a native, just out for fun!
presentations only! So, if you also get a PowerPoint presen-
Saddened, but not demoralized, we moved to an indoor sta- tation with this copy of Sampark, direct the curses to
dium – Benefica – to have a look at the football game which Mohan alone! For everything else , we (they) are collectively
was in progress between the local Asians and natives. Our responsible….
interest aroused, we sat there and started enjoying our
popcorn and juice.
Pankaj S. Chauhan
Sadly, the Asians lost the match... We returned
a.k.a Omi Bhaiya
home... Watched a bit of „Darna Manaa Hai‟ on B4U Movies...
And slept. So I guess a horror movie was a perfect end to a PFM „09
sad but eventful day here at Quelimane! Hope the next out-
ing to a theatre sees more viewers!

Rishi Prakash (2007 Batch),

Currently working with Olam International , Mozambique.

Get geared for an alumni meet on the 25th
and 26th of Jan 08.
More information to follow later...
Volume.1 Page 5

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Spicy news @ IIFM...

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and Prof V ught n ap
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s of them p a rt ies have r o n g, send oin t
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to be cen only the to be men ut that’s
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See you next month…!