Shock, amazement, problems – the Republic of India, home to one of the world’s oldest civilisations, evokes strong and sometimes extreme feelings – but never indifference.

Following the Nepalese stage of their journey, our young reporters crossed India from North to South, continuing their adventure of learning about MFIs (Microfinance Institutions) and their clients.

India can be unforgettable, even surreal, along the banks of the Ganges; at Orrcha, an ancient Mongol city “invaded by vegetation”; or at the sight of the Taj Mahal, “a symbol of love sealed for all eternity”. But India is also a polluted and unsanitary country, for example in Delhi, the capital, or in Goa.

Poverty, sickness, crowds; the north of India did not leave our travellers with the best of memories. It was only once they reached Mumbai (Bombay), the economic capital of the Republic of India, that they could clearly see the reason that the country is in the process of becoming one of the “key players of the 21st century”.

India is a pioneering country with regard to microfinance.
There are already rules and laws in place that have been conceived specifically for microfinancing and everything related to it: thus, for example, only commercial banks can receive customer savings, and consequently there are no microsavings banks associated with microcredit as there are in Nepal; on the other hand, the MFIs can insure their clients for the duration of the microcredit loan.

Historically, MFIs have been based in the South of India. However, a handful of the most important MFIs are beginning to focus on the North and to set up operations there, as demand in this region is also very strong. In practice, only the most stable MFIs are able to take on the risk of operating in these zones: the population is both physically remote and widely dispersed, leading to high transaction costs and making financial viability more difficult to achieve.

The MFIs encountered by our reporters – Satin in Delhi and Bandhan in Mumbai – both operate in the North, primarily in rural areas, where they must face daily problems such as “low population density, poor infrastructure and bad road conditions.”

The operating basis is essentially identical to that in Nepal, where groups of borrowers come together through word of mouth. Within each group, each person supports the others in the event of a loan repayment default. The loan is repaid in weekly instalments over the course of one year – the repayment schedule best adapted to the borrowers’ income flow.

It should be noted that the interest rate for loans provided by Bandhan, which also operates in the East, varies from one region to another; in Mumbai, the interest rate is 15%, whereas in the North-East it is 12.5%.

Finally, Bandhan and the group of micro-entrepreneurs based in Sion who were introduced to our young reporters by the MFI are unanimous: everyone succeeds in repaying their loans. “Our default rate is 0.1%,” confirms Sauraw Kumar of Bandhan. And nearly 2 million Indians have subscribed to a microcredit loan through Bandhan.

With respect to technology, and in particular to mobile banking and its use in the context of Bandhan’s activities, Mr. Kumar responded that India is still at the testing stage in mobile banking, and that the MFI has decided not to use these technologies until they have been well established.

However, he confirmed that “mobile banking will be a major issue in the years to come.”