I think it was Wayne Gretzky who said that what made him a great ice hockey player was that he skated to where the puck was going to be.
Entrepreneurs should go where the opportunities are and funding is easy to obtain. With this budget, focus on “aam aadmi” , Mohammed Yunus getting the Nobel Prize etc. the timing for microfinance seems to be good. Within microfinance if the herd is focused on rural microfinance maybe there is an opportunity in urban microfinance.
There is lot of money available for microfinance in general and some specifically for urban microfinance. The team probably should contain a banker who understands consumer lending and it will probably end up setting up an NBFC ( Non Banking Financial Company) which I think requires minimum 2 crores capital to get a license from RBI. Getting funded is never easy so the team has to be top notch. I spoke to Caitlin Baron ( caitlin@msdf.org) who heads microfinance in India for MSDF ( Michael & Susan Dell Foundation) . They are keen to invest in startup NBFC’s who target urban microfinance and she is willing to engage in discussions with good teams even before they have a business plan to help them shape a business plan.
If the team is in Delhi – NCR I would be happy to engage as well.
It would also be interesting to hear comments from readers on whether they think this is a good area to get into or not.
- Community Platform For Ward 103 - November 22, 2012
- Municipal Elections New Delhi-16 days for rolls to close - October 15, 2011
- The next Facebook ? - September 17, 2011
just adding to the sector developments, Sequoia invested $11.5mn in SKS.. first of “pure VC” investments in the field..
http://www.cnbc.com/id/17844093
Looks like there is lot of momentum building up in this field….
SriKrishna,
Hi I would be keen to volunteer to help if possible in some manner. your link is leading to the Ujjivan site, would help if you can mail me directly at deepakmnadiger@gmail.com or give me your contact details so that I can get in touch with you.
HI! My name is Srikrishna and I work with Ujjivan in Bangalore. We now have 12 branches in North/NW and East Bangalore. We’ve been able to build volumes and scale rapidly. The opportunity is great. There’s a large population of ubran poor, typically in a relatively small geographical area. That makes it very viable. Distances traveled to acquire customers is much less than it is in rural areas, hence those costs are lower. But the flipside is that rents, recruitment costs etc are high. We believe that the urban poor have been largely ignored by the govt. and other programs and that is the gap we are trying to address. Do get in touch with me if you would like to know more or meet…
Hi,
I have been following this discussion thread with some interest… I worked with a few SHGs in one of my consulting assignments and found the scale required is quite huge and also, there are some key problems in operationalising this in terms of having feet on ground who are acceptable to the community and who can assess the risk and get the community to back well. the level of local political involvement simply shoots whenever a community becomes successful. While slightly apolitical areas might be easier to work, places where cadre based parties are strong, invariably these groups get involved and government schemes like SJSRY get linked.
Also, the scalability of the model is when u can create success stories where groups went to substantially improve the lifestyles, for which the groups need to move onto mainstream finance from Micro finance mode. but given the obsession that financial institutions in india for address proof issued by governments ( think bpl cards, ration cards, voter id etc) , it becomes extremely difficult to sustain this and take them to the next level…..
there are lots of other such issues, if anyone is interested in discussing pl mail me, people around banaglore , we can catch up over a coffee for this, would love working with any group if they need any help…..
I tend to agree with Deepak Shenoy.
In cities, there have been cases of drivers, dhobis and domestic servants who have taken personal loans, and defaulted. Some (especially drivers) also just disappear. From all that we read, the default levels with rural women is far lower.
As soon as we put tighter norms for evaluating credit risk, and following up on defaults, more in line with regular bank credit, we are moving to a higher cost level. The viability of the microfinance model may be lost, in that case.