WHY WE STILL NEED A TRAINING WORKSHOP
ON MANAGING POLITICAL RISK IN MICROFINANCE?
The Indian microfinance market started growing in 2005/2006 and experienced burgeoning growth by 2009/2010. And then, all of us saw what political risk could do to Indian microfinance as evidenced by the 2010 Andhra Pradesh (AP) Microfinance crisis. 6 large AP based MFIs were nearly wiped out and many clients excluded!
Given what’s happening now in many states of India including Bihar, eastern UP and other places (see this for example and there are several other instances… http://thewire.in/2016/01/15/why-microfinance-is-becoming-a-bad-word-all-over-again-18937/) where “2010 AP Crisis Like Symptoms” are again showing their UGLY head again, it is very, very clear that political risk needs to be better managed by MFIs (irrespective of legal form). This course promises to be a first step towards that because it will set the framework for managing political risk and in doing so, it tries to disaggregate political risk by source and then helps MFIs to track and manage political risk.
Without any doubt, political risk requires a strategic perspective and strategic treatment of political risk by MFIs is going to very crucial for their long term survival as Political RISK can occur anytime. In my humble opinion, there is no better course to learn about POLITICAL RISK from than one which uses the 2010 Andhra Pradesh microfinance crisis and 2005/2006 Krishna crisis - both of which had a very strong political risk component! As Prof Malcolm Harper used to often say, crises teaches us a lot, I think it is important this knowledge is analyzed and used for the benefit of clients, investors, bankers, MFIs and regulators so that political risk, which can be a very destructive mechanism, is tracked and managed right from the starters.
So I think that why this course is very important as it will help investors and bankers better understand political risk and make wise investment/lending decisions. It should help MFIs better manage political risk and ensure that they are more presentable (in terms of their products, operations and competitive strategies) to regulators and others who could mitigate political risk. And it is likely to help the regulators and supervisors understand the limitations of their regulatory supervisory framework in terms of exposure to political risk and thereby, it should contribute to bring in changes to the legal and regulatory frameworks for the benefit of commercial microfinance that works for clients, MFIs, investors, bankers and regulators!
Of course, paramount to the concept of political risk is the notion of client protection and I think no discussion of political risk can take place without discussion on client protection and I think client protection is a theme that’s going to be running right through the workshop and I think it will play a very important role in mitigating political risk
So friends, we are here to break very new ground in microfinance and explore a topic that hereto been explored either as the small part of the other workshops or through their (informal/quasi formal) discussions. So having a formal workshop and using real life situations from the world’s largest microfinance market and world’s largest crisis situation 2010 AP microfinance crisis is going to give us better insight in to this strange animal of political risk and how better to manage it. Thank You and I look forward to all of you sharing and spreading the word around!
Ramesh S ARUNACHALAM