International Workshop on Inclusive Financial Innovation at XLRI, Jamshedpur

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Last month I got an invitation from Professor HK Pradan of XLRI Jamshedpur to attend the three-day International Workshop on Inclusive Financial Innovation: Making Finance and Insurance Markets Work for the Poor, conducted during March 1-3, 2012 XLRI Jamshedpur and it was a great learning experience in deed.

The international event was graced by eminent personalities from finance domain with focus on financial inclusion, academia, business leaders from the microfinance industry and financial institution, NGO workers and field level practitioners. The event brought them all in single platform to discuss the challenges and issues concerned to financial inclusion.
Father E Abraham, Director of XLRI Jamshedpur argued that credit should be given the status of basic needs like food, cloth, shelter, education etc. He also condemned the coercive collection practice of some MFIs in Andra Pradesh referring the recent article published in Hindu regarding the AP Microfinance crisis.

Dr. David Dror, Chairman of Micro Insurance Academy (MIA) New Delhi while delivering his inaugural presentation stressed on micro health insurance. Dr. Dror argued for a demand driven, community based insurance, where the community assesses their own risk and designs their insurance for a right price. His research and expertise on community based health insurance has opened the doors of opportunity to serve the under privileged in a profitable business way. According to Dr. Dror charity can’t provide a long term permanent solution to any kind of problem.

Basix group of companies were represented by Dr S.S. Tabrez Nasar, Associate Director, BASIX Academy for Livelihoods and Micro Banking Practice and Mihir Sahana, Director Indian Grameen Services. They presented case studies of potato growers of Jharkhand. The innovative livelihood development project was taken by Basix, where farmers were given credit by Basix and potato were bought by Pepsico at a pre determined price. Dr. Nasar said that credit without insurance is one kind of responsibility and stressed on weather insurance. (Basix is the first organization to adopt weather insurance in collaboration of ICICI Lombard)

Another innovative model was presented by Dr. Rangan Varadan, CEO of Microgram. Dr. Varadan said that financial inclusion doesn’t mean merely opening a no frill bank account or providing just credit. Credit is necessary but it is not sufficient, to uplift the poor, an ecosystem is needed, that encourages the customer orientation of products and ownership among of the beneficiaries. He also stated that Microgram has started such model on profit sharing between customers and the investors.

In a penal discussion Dr. Muhammad Masudur Rahaman from Bangladesh Microcredit Regulatory Authority advocated sustainable microfinance. In his note he advocated “financial inclusion for poverty eradication”. He also suggested regulatory reform for Indian microfinance industry to allow MFIs to offer other financial products like savings, insurance and remittance etc to scale up the poverty alleviation initiative. He refers the importance of creating specialized bank like Bangladesh Grameen Bank and wholesale funding agency for microfinance. He criticized the supply driven microfinance approach in India, where demand side (customer orientation) is ignored. Dr. Alok Misra CEO, Micro-Credit Rating International Limited (M-CRIL) supporting Dr. Rahman said that our government is not taking the risk to allow the MFIs to offer savings for merely regulatory comfort. Dr. Misra also predicts that if the MFIs are allowed to take savings, it will build a holistic relationship between customer and MFIs and will also decrease the cost of credit.

Another important outcome of the workshop was call for forming an international research network on inclusive finance like SSRN (Social Science Research Network). Dr. HK Pradan, Professor of Finance and Economics, XLRI Jamshedpur, the mentor and architect of the focused event said that such network will help to share and recognize the innovative ideas among the industry giant, academia, policy maker and field level practitioners to bring out the poor from the misery of poverty cycle.

The valedictory function of the three day international event was addressed by SBI Managing Director, Mr. A Krishna Kumar. He is optimistic regarding the Business Correspondence model for financial inclusion for the maximum out reach.

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