India as Hotbed of Microfinance Innovation
November 9, 2009 2 CommentsThe financial press has been reporting on the upcoming IPO of SKS Microfinance, one of India’s (and the world’s) largest microfinance institutions. But that is just the tip of the iceberg in terms of changes, and, in particular, innovations, to the microfinance field that are coming out of India. In some cases these are alliances across borders, and in other cases, they are entirely India-based. In all cases, they show how India has become a robust marketplace of ideas when it comes to providing financial services to the poor. Here is a great example of innovations in Indian microfinance:
UnitedProsperity.org: United Prosperity provides loan guarantees to make microfinance loans more enticing to banks. By splitting the risk with the lender, United Prosperity encourages banks to provide more capital to the poor. And because it’s set up on a P2P model, individuals can be the guarantor–not just institutions.
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The smart thing about UnitedProsperity.org is that for every dollar you gurantee, the loan is twise the size. Double Impact for your dollar!
Hi Ryan,
Thanks for bringing out the innovation with UnitedProsperity.org.
UnitedProsperity.org is incorporated in California and its initial work is in India. For UnitedProsperity.org I think Silicon Valley and India both deserve the kudos for the innovation.
And as noted in the earlier comment we offer greater impact for the individual guarantor. Secondly we mitigate foreign exchange risk for the microfinance institution (MFI) and the individual guarantor. Lastly and most importantly we link up the MFI to the local bank so that they can form social and commercial relationships to tap into the vast amounts of funds available with banks in the developing countries. This linkage helps the MFI to develop a credit history with the bank, get greater recognition from other local banks and eventually over a course of time access local bank funds without the need of an international guarantee.
Thus the guarantor’s funds are used extremely strategically to strengthen institutions in the developing world apart from helping the poor entrepreneur earn her livelihood.
Best Regards
Bhalchander
Founder and CEO – UnitedProsperity.org