UN Secretary-General’s Special Advocate for Inclusive Finance for Development, Princess Máxima of Netherlands, opened the annual conference on microcredit in New Delhi. In an interview with Sreelatha Menon, she says competition alone can keep microfinance rates low. Excerpts:
How did you get interested in the subject of microcredit and financial inclusion?
I am an economist and worked as a banker in New York and Argentina where I was drawn into the area of microcredit. After my marriage, I was invited to the United Nations group on financial inclusion and was later asked to contribute as special advisor.
What are your major worries about financial inclusion?
It is not about microcredit. It is about an array of services such as deposits, insurance products. My core work is to advocate the importance of financial inclusion and I have many agencies such as the International Monetary Fund and International Finance Corporation which are helping me.
How do you help the cause in countries such as India? Do you provide aid to small institutions?
I know people in the sector and I can put people in touch with the right groups.
The growth of microfinance in India is supposed to bridge the gap in financial inclusion. Is it happening?
The growth here is phenomenal at 95 per cent a year. About 20 million Indians now have access to microcredit, compared to less than one million five years ago. This is an impressive growth by any standard. It is also very innovative. The type of services MFIs are bringing to their clients is amazing. But what still has not happened here is MFIs offering deposit services. But it is understood that regulators are concerned about the safety of the money of the poor. When savings products are accessible, they are widely used. For example, in countries such as Kenya and Uganda, when appropriate products are available, savings level has tripled, so has the number of savers.
You have been meeting self help groups (SHGs) here. Do you think they have made the progress they should have?
Well some have and some haven’t. What should be done is that the successes should be identified and their trajectory of growth should be mapped for replication in other areas. The key to SHGs is to keep going where the problem sets in. I met women in villages in Karnataka in a SHG started by MYRADA who pays for the investment in a dam which irrigates their fields. I asked them if their husbands were bothering them and they said that they have bought them tractors and they are fine. So loans here are just part of the whole process.
Should there be a ceiling on profitability of MFIs to stop exploitation of the poor?
The UN stand is that seeing the declining interest rates in microfinance the world over, the best deterrent is competition and transparency.
What about MFIs such as Mexico-based Compartomos which got listed on the stock market?
Well their rates are falling too. There is public opinion and competition to deter.
