07-09-2012, 11:28 AM
Community Collective Society for Integrated Development (CCFID)
CCFID PROJECT 11.10.2011.docx (Size: 296.73 KB / Downloads: 36)
ABSTRACT:
More than subsidies poor need access to credit. Absence of formal employment make them non `bankable'. This forces them to borrow from local moneylenders at exhorbitant interest rates. Many innovative institutional mechanisms have been developed across the world to enhance credit to poor even in the absence of formal mortgage. The present paper discusses conceptual framework of a microfinance institution in India. The successes and failures of various microfinance institutions around the world have been evaluated and lessons learnt have been incorporated in a model microfinance institutional mechanism for India.
INTRODUCTION
CCFID as one of the lead professionally managed development organisations working in tsunami affected regions of south India recognizes this complementary nature of microfinance and livelihood promotion. As a first step to adopting the Livelihood Financing approach, CCFID initiated an in-depth two month field oriented research study with support from one of the lead management institutions, the Indian Institute of Forest Management, Bhopal, India. The study was conducted in April-June, 2007 in Cuddalore district of Tamil Nadu and Karaikal district of Pondicherry.
Livelihood Resource and Training Centre (LRC) of CCFID will provide that much needed interface by offering the business development services and institutional development services along with the financial services like credit and insurance. For ensuring that the LRC provides the desired services to the people in an effective and efficient way, a business plan for the coming five years is prepared on with keeping two processes in perspective - strategic planning and operational planning.
Strategic planning entails articulating broad institutional goals, assessing the institution's performance in achieving its goals, and then selecting a strategy that enhances the institution's ability to expand outreach and achieve (or maintain) profitability.
INDUSTRY PROFILE
Microfinance is the provision of financial services to low income clients, including consumers and the self employed , who traditionally lack access to banking and related services.
More broadly, it is a movement whose object is "a world in which as many poor and near-poor households as possible have permanent access to an appropriate range of high quality financial services, including not just credit but also savings, insurance, and fund transfers." Those who promote microfinance generally believe that such access will help poor people out of poverty.
Micro Finance (mF) is becoming an effective tool in addressing the credit needs of the poor from rural areas. But development in this sector, in the last 15 years has thrown so many challenges and as well taught us some very important lessons. The globalization of economy led to the slow withdrawal of several services whichever hitherto were available for the poor. One such important service is the credit delivery for the poor by the State. The emerging painful question now is how and through whom; poor will get access to credit and at what terms.
The major pointers in this direction could be the outreach and sustainability. These two issues need closer examination and serious consideration. Except a few, many of the CBO’s working with rural communities is finding it increasingly difficult to manage Microfinance.
Knowledge management
Knowledge management at CCFID is focused on dissemination of relevant information to staff members. Staffs are encouraged to learn, participate and utilize their efficiency at the relevant area of operation. Sharing of knowledge among the staff members, management is highly prioritized in the working culture of CCFID. Orienting the filed staff and clients on market demand, product customizations are other features of CCFID knowledge management. In the year 2010 CCFID has started one research study on “Baseline study and Value Chain analysis of cashew-A sustainable Livelihood promotion opportunity through natural resource management”. The deliverables of the study will be as follows.
FINANCIAL SERVICES:
Savings; Credit both short- and long-term, for investment in natural resources: land, water, trees, livestock, energy Insurance for the lives and livelihoods of the poor, covering health, crops and livestock Infrastructure finance: roads, power, market-places, telecom, as needed; and Investment in human development including in nutrition, health, education, vocational training.
Microfinance is the provision of financial services to low income clients, including consumers and the self employed, who traditionally lack access to banking and related services.
More broadly, it is a movement whose object is "a world in which as many poor and near-poor households as possible have permanent access to an appropriate range of high quality financial services, including not just credit but also savings, insurance, and fund transfers." Those who promote microfinance generally believe that such access will help poor people out of poverty.
In developing economies and particularly in the rural areas, many activities that would be classified in the developed world as financial are not monetized: that is, money is not used to carry them out. Almost by definition, poor people have very little money. But circumstances often arise in their lives in which they need money or the things money can buy.
Conclusion
Some valuable lessons can be drawn from the experience of successful Microfinance operation. First of all, the poor repay their loans and are willing to pay for higher interest rates than commercial banks provided that access to credit is provided. The solidarity group pressure and sequential lending provide strong repayment motivation and produce extremely low default rates. Secondly, the poor save and hence microfinance should provide both savings and loan facilities. These two findings imply that banking on the poor can be a profitable business. However, attaining financial viability and sustainability is the major institutional challenge. Deposit mobilization is the major means for microfinance institutions to expand outreach by leveraging equity. In order to be sustainable, microfinance lending should be grounded on market principles because large scale lending cannot be accomplished through subsidies.