Reforming Microfinance: Bhandan looks to scale it up

Earlier today I posted and Op-Ed on why I believe that microfinance is an incomplete solution to ending poverty because it does not lead to job creation — a necessary precondition for development. This concern has clearly been considered within the microfinance community themselves, as Bhandan — a MFI that targets women in Bengal — has established a new program to try to make microfinance more scalable.

But as Ghosh says, it’s perhaps time to look beyond traditional loan schemes. “Our experience suggests that there is a growing need among our members for higher loans so that they can expand their businesses,” he says. To set things right, Bandhan is using a new method now—the Micro Enterprise Programme, which offers loans of Rs 15,000-50,000 to those who have been its members for at least one year.

There are two other riders, though: the loan should be invested in an existing micro enterprise (for expansion) and utilisation of the loan should generate employment for at least one poor person in the locality.

In addition to the larger loans which should encourage expansion of the business, having the n+1 employment requirement is definitely a step in the right direction. We will have to wait and see the upper limits of this approach and whether it can truly ramp up to meet the overall demand for jobs by people in India and elsewhere.

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One Response

  1. […] Bhandan gets featured in Business Standard Posted on April 28, 2008 by Vinay I have written on Bhandan before, with regard to its efforts to incorporate job creation into its larger loans […]

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