The next billion

Till a few years ago, N. Padmavathy and her six friends were daily-wage workers in an export unit in Chennai, with a monthly income of not more than Rs 2,000.

At times, when she had to pay her children's school fees or take her children to the doctor, she had to borrow at hefty rates from the local money lender.

As a daily-wage worker, she could never predict her income, till she discovered the power of microcredit. A Rs 15,000 loan each, taken by Padmavathy and her six colleagues, has made entrepreneurs of these daily-wage workers.

Today, they are the proud owners of a tailoring unit, which is an exclusive franchisee of a leading exporter.

Says P.N. Vasudevan, managing director of Equitas: "The loans we provide not only help the customers improve their business activity levels but also because of lower rates and easy repayment periods, customers can come out of the debt trap laid by money lenders."

Thanks to urban micro-finance institutions (MFIs) like Equitas, Padmavathy and others of her ilk now have access to credit and a better way of life.

Seeing an aching need among this category, often referred to as the Next Billion, a new set of players are coming up in urban hubs to offer financial solutions—primarily credit and insurance—to this economically active group of consumers.

If daily wage workers in Chennai are buying out garment manufacturing units, in Mumbai puran poli makers are doubling their turnover with easy access to microcredit.

Micro-finance may have started as an idea by the not-for-profit sector to cater to those who were out of the ambit of any financial sector, it has, however, emerged as a market share opportunity that banks and non-banking financial companies are fast lapping up.

Conceptually it's an irony-because what started out as an answer to the neglect by the financial sector is fast turning out an opportunity for it-and poses a dilemma- because regulation of this sector is through social pressure only.