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THE MICROFINANCE CHALLENGE AT ABN AMRO INDIA

THE MICROFINANCE CHALLENGE AT ABN AMRO INDIA. Global Conference on Access to Finance World Bank, Washington. WHY MICROFINANCE IN INDIA. 33% of India lives below the poverty line (Population: 1,000 Mln)

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THE MICROFINANCE CHALLENGE AT ABN AMRO INDIA

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  1. THE MICROFINANCE CHALLENGEAT ABN AMRO INDIA Global Conference on Access to FinanceWorld Bank, Washington

  2. WHY MICROFINANCE IN INDIA • 33% of India lives below the poverty line (Population: 1,000 Mln) • The demand for micro-credit is close to USD 30-40 billion. Supply meeting about 5% of this • Commercial banks unable to provide financial services as: • Transaction costs for small loans are very high • Credit scoring used in banks is inapplicable for microfinance • Documentation required for a bank loan is cumbersome for the illiterate poor • Collateral based lending for clients with an inadequate asset base • Thus dependence on money lenders high. Interest rates can range from 60-300% per annum

  3. OUR OBJECTIVE ABN AMRO India’s microfinance is aimed at addressing this demand and contributing to poverty reduction, while creating EP returns for the bank.

  4. OUR ACHIEVEMENTS • First International Bank, largest in MF in India • 18 MFI partners in 7 states Performance

  5. THE BUSINESS MODEL ABN AMRO Bank Micro Finance Institution (MFI) WHOLESALE LOAN MICROCREDIT CYCLE OF SUSTAINABLE DEVELOPMENT Poverty Reduction • Micro Enterprise • Productive asset • Redemption of high cost debt Creation of mainstream bank customers in a few generations

  6. SUPPORTING THE BUSINESS MENTORING THE MFIs MFI INCREASED OUTREACH I. T. COST REDUCTION INSTITUTIONAL SUSTAINABILITY GOVERNANCE ACCESS TO MAINSTREAM FINANCIAL SECTOR CREDIT DISCIPLINE FINANCIAL VIABILITY

  7. MENTORING INITIATIVES • Close client engagement • Handholding partner MFIs • Customizing products • Impact assessment • Micro Finance Process Excellence Awards

  8. THE CHALLENGES OVERCOME

  9. THE CHALLENGES WE FACE TODAY

  10. VALUABLE LESSONS • Internal buy-in is critical for business growth and success • Continuous adaptation to the dynamic socio-political environment is necessary for the sustainability of the microfinance business • Appropriate legal forms, good governance and technology will be the drivers for the success of the MFIs • Innovation in financial products is essential to maintain ABN AMRO’s status as a preferred lender • Credit is an necessary but not a sufficient condition for poverty alleviation

  11. Our mission To take micro credit to 1 Mln rural poor by 2009… In a commercial, profitable and therefore sustainable way

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