ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Articles by K KaladharSubscribe to K Kaladhar

Microfinance in India-Design, Structure and Governance

Design, Structure and Governance K Kaladhar Indian microfinance is vast and basically rural (and semi-urban) in character The ongoing financial sector reforms have focused so far on strengthening bottomlines without taking into account the rural microfinance dimension, Financial market liberalisation has, thus, not yielded results that are effective in improving microfinance transactions. Developing microfinance markets involves removing imperfections that have wrongly been assumed to be policy-induced, hence the ineffectiveness of the present frame of financial market liberalisation paradigm. It is to be realised that these imperfections actually arise from structural and institutional rigidities of microfinance markets. The new institutional economics offers us some insights for removing these imperfections, In the next leg of reforms it is imperative that measures are initiated to address these concerns by properly internalising the nature and content of microfinance and focusing on policy stance, restructuring, design features and governance in the light of perspectives from institutional economics.

Rural Financial Institutions-Mixing Apples with Oranges

Rural Financial Institutions Mixing Apples with Oranges K Kaladhar I HAVE carefully gone through Kishore C Samal's note (EPW, February 8) commenting on my paper on 'Retooling Rural Financial Institutions' (EPW, September 28, 1996). Samal has pointed out that low collection rates, heavy dependence on subsidies, use of traditional banking methods, occasional loan waivers, a low outreach, lackadaisical administration without innovative management and political interference as reasons for failure of RFIs in developing countries. He points out that as indicated by me RFIs have ignored manageability in the process of determining viability. I would invite in this connection his attention to the very first paragraph of my paper where all the reasons cited by him have already been analysed as sources of failure of RFIs and the point of departure that I made in the paper was to look at the RFIs from the operational perspectives, in terms of organisational culture, removing informational asymmetry, etc. Incidentally, if Samal were to trace the reasons for low collection rates, use of traditional banking methods, lackadaisical administration without innovative management he would come back to my point of inappropriateness of the strategy, systems and procedures followed by RFIs. As regards occasional loan waivers and political interference, I hold them as self- evident truths. The aspect of outreach in the Indian context has been quite striking compared to many other developing countries and we have done fairly well in statistical terms.

Designing Financial Services for Rural Poor-Retooling Rural Financial Institutions

Retooling Rural Financial Institutions?
K Kaladhar Requirements of financial services for poor rural households encompass consumption smoothening, human capital formation, production and investment credit and insurance, in addition to savings facilities. While the informal sector provides most of the services, the formal rural financial institutions have inappropriate tools and perspectives in delivering the services. Unless institutions retool themselves by focusing on a rural household's economy rather than limiting themselves to activity linked lending, they cannot be successful in delivery of financial services.

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