The microfinance bill, facing an uncertain fate now, will only emerge the better from collective wisdom, as the parliamentary standing committee on finance has been holding extensive consultations over it. Meanwhile, the microfinance sector needs to learn an important lesson and start engaging with grassroots-level administrators and political leaders.

That was the take-home from a roundtable panel discussion on ‘Savings of the Poor: Rebooting Microfinance For Inclusion’, organised by Governance Now in association with Microfinance Institutions Network (MFIN) in New Delhi on Thursday.

The microfinance bill, aiming to revamp the sector that is slowly but surely coming out of the shadows of the crisis in Andhra Pradesh, was introduced in the Lok Sabha last year and referred to the standing committee on finance, which has been deliberating upon it. With the countdown to the elections on, and parliamentary proceedings affected by politics, it is not clear if the bill will be passed in this session, or for that matter, during the term of the current Lok Sabha.

Vijay Mahajan, CEO of BASIX, summed up the industry mood thus: “The bill faces a big uncertainty. If it lapses, it will be the second time. The nation has not been able to make up its mind.”

Anurag Jain, joint secretary (financial services) at the finance ministry who drafted the bill, told the panellists that as far as bureaucratic work was concerned it was over, but it was a race against time for the bill in parliament. “If it does not happen by December, we will have to start again,” he said.

Prem Das Rai, a Sikkim Democratic Front MP who is also a member of the standing committee on finance, was not much optimistic either. “The bill may be passed by the winter session or even in the truncated budget session... but everybody is getting ready for elections.” He said the bill might still be salvaged by introducing it in the Rajya Sabha, but “that would be too cumbersome” and might lead to a fate similar to that of the women’s reservation bill which is yet to be passed.

Both Jain and Rai agreed that, politics apart, the bill was a fine piece of work that could indeed reboot the microfinance sector. Rai termed it as a “very sensible bill”, while Jain pointed out that it was drafted after extensive consultations and had the right amount of flexibility in it.

“It is only a framework. Contentious issues will emerge later. The standing committee has been listening to a lot of wisdom, and the outcome will be a result of collective wisdom. In democracy, there are a lot of refinements over what we start with,” added Jain.

Democracy was the watchword for Rai too, who advised the microfinance fraternity to “understand that the domain of inclusion is going to be more than political... the moment you bring together people, there is a neat arrangement for political appropriation. This was one great failure of the sector”.

From the industry, Mathew Titus, executive director of Sa-Dhan, admitted that “The sector was completely ignorant of the need to engage with the local administration... half of our problems would have been solved (if we had done so).”

Alok Prasad, CEO of MFIN, spoke about his “favourite theme of a national financial architecture”. “Should we not put our minds together, and realise the need to see the larger picture (of financial inclusion)? We have to move forward, we need to realise this is not about you versus me but you and me working together. And the microfinance bill is critical in this scheme of things.”

As for the objective of financial inclusion, there was unanimity in the panel that the banks were not the ideal players to take the lead. David Dror, chairman of Micro-Insurance Academy, put it this way: “A candle-maker will not invent the electric bulb. Banks are not the right vehicle for inclusion, not in any country. Banks are interested (only) in making the poor bankable.”

Rai added, “In the 60-odd years we have not been able to take banking to the poor. I have not seen enthusiasm from the last-mile operator for the BC (business correspondent) model.

Among the other issues on the discussion agenda were the role of states in supervision, lessons of the Andhra crisis and the road ahead for the sector.

Other panellists were: Alok Misra, CEO, Micro-Credit Ratings International Ltd, Pradeep Shankar, director, Resurgent India, Naveen Anand of UNDP, Ragini Chowdhury of DFID, Ajay Tankha, a subject expert on self-help groups (SHGs), Rajeev Bhatia, chief strategy officer at Satin Creditcare Network, Vibhu Arya, a subject expert on branchless banking, Pallavi Sen of MFIN, and veteran financial journalist Vivian Fernandes as moderator.