Budget Reactions: Budget has few schemes for microfinance sector says MFIN

Alok Prasad
MFIN

The 2013-14 budget contains few initiatives for promotion of universal financial inclusion. From the standpoint of the Microfinance Industry, a token contribution of an additional ` 100 crore to the India Microfinance Equity Fund has been made. While the symbolism of this allocation is important, it provides practically no real benefit to the industry which serves over 22 million unbanked clients in over 500 districts spread across 27 states.

The microfinance sector needs regulatory clarity and stability. The issue of regulatory duality needs to be addressed urgently. And, we hope that the Microfinance Institutions (Development and Regulation) Bill announced by the FM in the last year’s Budget Speech will get passed in the next few months.

The proposed all-women public sector bank, aimed at catering to SHGs and other women in rural areas is, in theory, a good step. But, the execution challenge is large. Hopefully, it will not end up like many other well –intentioned government schemes which fail to take-off.

Allowing business correspondents to offer micro-insurance products will help take the service to a larger client base and also improve their revenue model. Permitting MFIs to serve as business correspondents is an overdue step for which the industry has been patiently waiting.