Pioneers in Microfinance, Part 2: MYRADA

Today, Microcapital.org published the second part of their “Pioneers in Microfinance” series, in which they continued their interview of a pioneer in microfinance, Aloysius P. Fernandez, Executive Director MYRADA and Chairman of the Board of Microfinance Institution Sanghamithra Rural Financial Services.   To refresh your memory on Part One of this series, read this earlier post by Vinay.

The interview continues where it left off in Part One by outlining both the impetus and the process involved in establishing linkages between the Reserve Bank of India (RBI) and Self-Help Affinity Groups (SAG).  In the interview, Fernandez describes how MYRADA attempted to implement changes on a policy level by approaching RBI and the National Bank for Agriculture and Rural Development (NABARD) regarding the lending process:

In 1989, he [NABARD President and CEO P. R. Nayak] asked me, “Now, what policy change do you want?” I said, “Allow the banks to give loans without asking for the purpose. Why are you so particular about giving based on viable loans and unit costs?” They would give loans for sheep. There would have to be 20 female sheep and one male sheep, so that was supposed to be a viable unit. But, if you give such a big unit to a single woman, she has to leave all her other work and look after this. So, in order to survive she will sell two sheep. There goes your viable unit. We found that 60 percent of the recovery didn’t come from the asset, so why are you wasting your time? Let people decide [how to use their loans].

Fernandez then goes on to talk about the proliferation of NGOs based on the SHG model in India, and their perceived limitations, including potential for growth in the future: Continue reading