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MicroFinance
It is now well accepted that microFinance is one of the most powerful tools to address global poverty. The microFinance movement in India has grown at a tremendous pace in the last decade, with increased debt financing coming in incrementally from both the private sector and the State. MicroFinance presently reaches out to 50 million people, with an effective borrower population of 36.8 million. However, given India’s total population of 1,100 million and an effective poverty outreach of just 35 percent, the challenges in mainstreaming microFinance are many.
Capacity gaps in Indian MicroFinance
Though the number of institutions delivering microFinance services is increasing rapidly, the same is not true of the capacities/skills/technology available within the Indian microFinance. The major issues being faced by the Indian microfinance sector in successfully ‘scaling up’ can briefly be categorized into:
- Human Resource issues - inadequate staff capacity/s, high staff attrition, insufficient skills and analytical capacities
- Knowledge management aspects - characterized by low levels of client awareness and financial education, and lack of transparency and governance
- Product failures - insufficient research skills for product development (loans and product structuring) leading to a supply mismatch to adequately fulfil the client needs
- Financial constraints - lack of corporate equity investment, and absence of rigorous valuation models, pre-dominance of debt financing of portfolio as compared to equity financing, leading to very high levels of leverage
What KPMG can do
KPMG’s Aid and Development Services (ADS) aims to step into this void and provide a comprehensive set of business counselling, financial management, advisory and technical support to the mature and fledgling MFIs. For facilitating the capacity development of the sector, and increasing the financial infusion of funds, KPMG intends to provide the following services.
- Capacity Building inputs and Financial Education
- Transparency and Assurance (including Impact Assessment services)
- Valuation and Assessment services
- Knowledge Management to increase Aid efficiency
- Product Development and Research
- Tax and institutional advisory (including facilitation of setting up of entities)
For further details contact us
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