“Never provide poor solutions to poor people,” says Chetana Gala Sinha, Founder of Mann Deshi Mahila Sahkari Bank and Foundation, focused on women micro-enterprises.
Sinha, who set up the cooperative bank in 1997 with a small amount raised from friends, has been a proponent of financial inclusion and one that treats all as equal. The bank now has a capital of Rs 150 crore and over one lakh rural women are banking with Mann Deshi.
Speaking on the sidelines of recently concluded Sankalp Summit on impact investing, Sinha said rural people have come out of poverty mindset and are embracing technology. “Mainstream banking sector needs to take more risks with women micro-entrepreneurs. Microcredit being given to rural women self-help groups need to be extended women run micro-enterprises.”
Women run micro-enterprises are already there, and they need scaling, which is difficult with the fragmented economy in India. She also spoke about creating an ecosystem to facilitate micro-enterprises by leveraging technology and improving ease of doing business in rural areas.
Here’s an excerpt from the conversation Sinha had with CNBC-TV18 about impact investing and the funding challenges for women micro-entrepreneurs running social enterprises.
I was reading some data which said that while in the normal commercial enterprises only about 8 to 10 percent women are running it, but when it comes to social enterprises a lot more women are running social enterprises and when it comes to financing for that how far are we?
Chetna: So honestly, we have to walk 1000's of miles for that, but one thing I'm a bit more hopeful about that things is now very different. When you talk about women-owned businesses, women-owned social enterprises and investing in that. Because of technology, you have real-time cash flows. A lot of informal economy is coming in digital. The question is that if it would be easier for them, that whole supply chain of digitalization should be done and people are coming forward. So, if you have that, on one side you have the credit rating, on the other side you have the digitalized working capital or you have those transactions. You can find out how much is the working capital required, so you have real-time data on the financial transactions of these people.
And then the third is with technology we can leverage the last mile.
Finance Minister talked about the social stock exchange. How will the social stock exchange operate, if the micro-enterprises don't flourish? So micro-enterprises are ready, these women have already started the business, and they now need to scale. Scaling is difficult with the fragmented economy in India, the way we have villages, but now, the shared economy is coming together and e-platforms are coming up. Let me give you an example of GST or registration of businesses for micro-enterprises or getting food and drug licenses. I feel that ease of business is still a big challenge in this country and this is what the government has to make real.
Q: Ease of doing business ranking comes in every year. And we see that India is improving in a lot of parameters. You are saying that it’s actually not reflecting especially on the rural side or micro-enterprise side?
Chetna: India is like a mini Europe. So in some states, you will see that it’s doing very well. But in some states like North India how many women enterprises are there? Like in Bihar, UP, I know Ajeevika is doing great in Bihar but I think we should now graduate from that. So in that way, I think that ease of doing business index has improved but do you just want to surpass five more countries or want to surpass thirty-five countries like China? In villages, women have never been to school but they are doing digital transactions. So why do we think that we are happy being better than just five more countries? India is having the highest number of IT Engineers. I think we just have to be more ambitious.
Q: How much of focus are the mainstream banks giving when it comes to priority sector lending to women entrepreneurs and micro-enterprises run by women? Do you see that there is a gap there ? or do you see more needs to be desired or is it good enough?
Chetna: I am glad that RBI has brought trading on priority sector lending, where you can trade on it. So a lot of MFI started trading on it. So that you can replicate more and more priority sector lending to micro-enterprise or microcredit. Where microcredit is coming, you have women entrepreneurs. You have invested in women, why? Because they are bankable, they are repaying in time and you are getting a return in time. That is the whole thing. We have a twenty million dollar industry of microcredit, which has been successful. Why it is not graduating from microcredit to funding micro-enterprises? Women are ready, they have taken loans and they know their CIBIL rating also.
I feel that the mainstream banking sector, mainstream investors are not taking enough risk. They have to take that. You are happy with your returns in microcredit and say that I am doing priority sector lending but your cost is very high. And if you want to do micro-enterprise you have to take a risk, give it at a lower rate, so that for the enterprises, their costs will come down. Enterprise margins will increase, that is important. The eco-system will have to be created.
Q: There have been various formats in which rural financing has progressed in India from micro-finance to other segments in India. What in your sense has been some of the best examples of financing for women entrepreneurs in rural areas?
Chetna: Let me first talk about Mudra. Now when you see the Mudra report, 70 percent of the women have taken the loan under the scheme which gives you a very hopeful situation. Then you go in detail and then you find out, 70 percent have taken them up but the maximum loan amount is 50,000 thousand rupees. Then, you get a bit frustrated, why not micro-enterprise? Why just micro-credit? But still in the small rural branches, people are talking about it, people are talking about women entrepreneurs. You have district-level committees and there are micro-entrepreneurs that push the scheme at district level also.
Q: There are government programs that specifically lend to women and especially ST/SC women or Dalit women. Have they made a difference on the ground?
Chetna: Particularly for Dalit women, there is a Center for the Society Improvement which provides finance which is a Section 25 company and Mann Deshi has partnered with them. And even with this SHG revolving fund, it is coming to Dalit women. While these government programs are there, I always say that it is very important that when you work with communities, when you work with last mile and those who are left out, the mainstream sector, the investor, the corporate, the banker should ‘never provide poor solutions to poor people.’ When you are talking about the inclusions, you end up thinking they are poor, we have to work out the simple way. But these people, they are very smart and with the solutions, they want to look at prosperity and they have already come out of the poverty mindset. So we have to also provide solutions to prosper.
Q: From the current government policy perspective, where do you think the challenge lies? What more is desired from the government to give women-run micro-enterprises an actual push, to take that leap you were talking about?
Chetna: So let me give you an example. At the micro-level we say that we are investing in gender, we are making so much of provision and all that. But those are the big numbers at a macro level, you have to work at the ground level how are you going to do that? If you have this Zilla Udyog Kendra, District Industrial Centre, we used to have ITIs, you have to convert them to help businesses. It has to be the most strategic way of investing in it. So at the district level, create those consortiums, where one-time shop, if I have to set up a micro-enterprise and if I need a food and truck license, this is the place I get it. And the government machinery is ready to give workshops, training, and license.
At a district level, that is one. Second is when you start the business then the other extension services should be helping you, the understanding, the packaging and all that are the extension services which can be given not only by just government but other partners like the farmer producer companies, the other social enterprises, etc. And then the main thing comes which is the capital.
Women are talking about digitalization, they have real-time transactions. Bankers have to come out from their old mindset and create such products which give fast capital. I feel its not only debt but also equity and we have to be innovative in creating these financial instruments.
Q: At this point in time, the rural consumption cycle is possibly at the lowest in many decades now, where do you see the challenge as far as money in the hands of people in rural India is concerned?
Chetna: The major issue that I find in rural India is the issue of liquidity. Money is not flowing in and one of the reasons is how much the farm sector is getting credit. All the institutions that we have at the local level, the agriculture society, credit unions, bankers doing priority sector lending but you don't see the actual liquidity. Once you don't see the liquid money moving around the sector, it is going to affect at every level. And you cannot get away by saying that there was a drought or floods, those natural calamities are going to happen and farmers are used to that. In spite of such situations, you can see that they still operate, there is a slowdown but still, people are going for the wealth creations like gold. It is not as high as it used to be but the major issue is the infusion of liquidity in rural India, in the farm sector particularly.