No poverty of ideas

Financial inclusion is a favourite mantra with governments these days, but for T. Vijay Kumar it’s much more than that. Kumar is the CEO of the Society for Elimination of Rural Poverty (SERP) in Andhra Pradesh, an autonomous society registered under the Societies Act to implement a World Bank-supported project, which has the state Chief Minister as the Chairperson.

The programme was started in December 2006. In the first year of operations, it was implemented in 323 villages, with disbursements to the tune of Rs 174 crore. By end-March 2008 (by which time the second year would be completed), SERP intends to reach out to 3,000 villages, and disburse Rs 1,800 crore to some 3 lakh families (typically each village has about 100 to 120 families). As of February 2008, the society had reached out to 2,185 villages, and disbursed Rs 1,155 crore. “Our aim is to add 8,000 villages each year from next year (and disburse Rs 6,500 crore each year) to cover all villages in Andhra (around 27,000) in the next three years (that is by 2011). This will involve mobilising around Rs 20,000 crore from the banks for the SHGs under the total financial inclusion model. But how does this become sustainable? “It is simple economics.

The person who was bleeding earlier paying annual interest rates of 60-100 per cent in urban areas and between 36 and 60 per cent in rural areas has got down to paying just 3 per cent per annum under the interest subsidy scheme of the state government in Andhra Pradesh,” says Kumar. This, he adds, not only helps him to pay back high-cost debt but also unleash entrepreneurial abilities.

In his recent Budget speech, Finance Minister P. Chidambaram said that banks will be encouraged to embrace the concept of total financial inclusion. Kumar points out that other states, including Tamil Nadu, Orissa and Bihar, are keen to follow the SERP model.

— E. Kumar Sharma