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Topic: Micro Finance Speaker: N. Srinivasan -July 13

The students of a third year BSc along with the MSc students of Symbiosis School of Economics attended an insightful guest lecture by the Indian Micro – Finance guru, Mr. N Srinivasan himself. Given that the stipulated syllabus entails the students to have a macro perspective on development and its characteristics, this guest lecture established the saying – Every drop makes the ocean. Microeconomics and micro finance are as much a requisite to development as macroeconomics.

He started by clarifying that it is labeled micro – finance not because it is small in size, but because it aims for the inclusion of the smallest unit of the economy into the financial sector. With a light sense of humor and numerous anecdotes, he explained why the need for micro finance arose. There is a high level of exclusion of the poor and vulnerable from the formal financial opportunities. This happens for two reasons, firstly because the poor find banks elitist and are intimidated by the banking staff and secondly because the banks are not sure of the rural poor would return the loans borrowed. The gap was filled by Micro Finance Institutions (MFIs) who give loans to the vulnerable at 26% interest as against what the moneylenders would charge (120% interest). He also brought to life the fact that this bridging of the gap has many political consequences. When the poor, that constitute a majority of the politicians vote bank, do not seek him out as an altruist in times of need and go to the MFIs instead, politicians lose votes. He also spoke of the role of women and Self Help Groups in micro finance. Group based processes reduce delivery costs for the MFIs and at the same time group guarantees ensure there is very little risk related to repayment.

He spoke about how micro finance can make a difference by mainstreaming livelihoods that lie outside the formal economy, improving a quality of life for the vulnerable and giving a greater voice to women. On a closing note, he brought reality into the picture and said that micro finance acts as a pain management solution and not a cure in itself. All it has done is proved that there is a large demand and that this demand can be met without subsidies and can be equally profitable with private equity investment.

After all, it is Fortune at the Bottom of the Pyramid.