Fundamental to the growth and development of an industry is the research that aids its practice, especially in the context of microfinance in India. Though the industry has grown rapidly, the research has been trailing, resulting in a gap between research and practice, which the research community has struggled to bridge. Even among researchers, the ability to interact and gather viewpoints has been a challenge, thus hampering the quality of research and the synergies that could have been exploited.
To address these issues, and bridge the gap between practice and research and within the research community, the Centre for Microfinance (CMF) has launched a research capacity development programme called the Microfinance Researchers Alliance Program (MRAP) funded by Ford Foundation. Stressing the need for better research, Justin Oliver, Executive Director, CMF, says, “Excellent research is essential to inform the microfinance industry, encourage innovation, affect policy, and maximize the impact of initiatives”.
Launched in November 2008, with 19 researchers from across the country, the key objectives of the program are:
• To build research capacity among Indian researchers who are conducting or are interested in conducting research in microfinance.
• To build a strong network of Indian researchers working on these issues and translate individual knowledge into a sector-wide knowledge base.
• To foster “knowledge partnerships” between researchers and microfinance institutions and promote research-practice dialogues.
MRAP provides a platform where selected researchers are given training on various aspects that would help deliver better research output. This training is in the form of helping to frame the right research questions, research methodologies, developing questionnaires, undertaking field visits, workshops and importantly providing feedback as regards their research progress by way of a seminar. Also, through MRAP, CMF has launched an initiative that provides financial assistance to selected MRAP participants to conduct a field-based study on the status of microfinance in a particular region. This initiative, which draws inspiration from the State of the Sector Report, authored by N Srinivasan, aims to unearth new research questions for future research projects.
Recently, to track the progress of and offer suggestions to the researchers on their research studies, MRAP organized a seminar on August 6th, 2010, at IFMR’s office. The one-day seminar brought together all the researchers pursuing diverse projects under a single roof, along with N. Srinivasan, Bindu Ananth, President, IFMR Trust and Justin Oliver. The research studies presented ranged from a case study on “Why the clients default” to studies on Self-help groups and “An overview of microfinance in Assam”.
Dr Mani Nandhi’s study on” Why the clients default”, based on sample data, aimed to find the actual number of defaulter clients in relation to repayment clients, and dwelled on finding the reasons as to why clients default and the costs accruing to group members in the face of such defaults. The study shows that the proportion of defaulter clients to repayment clients is approximately 22%, with reasons for default being multifold, and among them, wilful default being most prevalent.
How then does an MFI possess a 100% On Time Repayment Record? Dr Nandhi says in her study that on the spot repayment is ensured by the centre manager by enforcing deadlines and constantly reminding clients about their “Joint Liability”. Also the processes of loan collection and repayment are well structured with staff incentives included. The study concludes that though MFIs have a good business model in place, they need to exhibit a human face and focus on the bottom line.
View the presentation below:
Later, an interesting presentation by Dr Debabrata Das focused on answering the status of microfinance in Assam and detailed the different practices and business models of MFIs working in Assam. The state has been witnessing rapid growth in microfinance reflected in the increase in the number of providers and high demand for credit. However, he observed that there is a disconnect between demand and supply especially in the rural areas.
View the presentation below:
All the presentations can be downloaded here.
The seminar made way for healthy exchange of dialogue and suggestions, led not just by the experts, but also among the researchers. It concluded with Bindu suggesting to the researchers that they would do well to choose narrower questions when undertaking research. A point, which N Srinivasan, also reiterated, in addition to suggesting that researchers should set aside their biases while undertaking their studies.