Microfinance to be Made Obsolete by the March of Technology?
Arun, T.

Microfinance is slated to join the ranks of The Flintstones, the crossbow, gas lamps, the pigeon post and the floppy disk — all excellent in their own time but rendered obsolete by the march of technology. What made microfinance tick? One, failure of formal finance to reach out to the majority, particularly in rural areas. So, when microfinance came up with a loan that was cheap when compared to the informal sources of credit, it found ready takers. Two, the paucity of alternate sources of cheap credit. This made people repay their microloans. If you spoilt your credit standing, you also spoilt the standing of the people in your group and you lost face, as well.

Both these conditions are disappearing. The second factor first. The success of microfinance has led to a rush of microfinance entrepreneurs into rural areas, who push money at all and sundry, to build up a large asset portfolio in a short time. Many rural women find themselves taking multiple loans and finding it difficult to repay most of them. But then, even if you defaulted on one, some other desperate chaser of micro gold at the bottom of the pyramid was at your doorstep with a loan offer.

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