The formal banking system?s penetration in north-eastern India is quite poor, according to a study by the apex body of micro-finance institutions, Sa-Dhan. The region consists of Sikkim, Arunachal Pradesh, Assam, Nagaland, Manipur, Mizoram, Tripura and Meghalaya.
Though financial markets do exist in the region, it is characterised by small and frequent requirement and is segmented, particularly in the hills. Majority of the formal credit flows as personal loans to urban customers, largely comprising government employees and professionals. Within this group, the smaller size financial needs are the most neglected regarding institutional credit, the study says.
However, the region is rich in traditional institutions of financing, which mainly function on the basis of social bonding. Interestingly, women in this region are economically more active compared with the rest of the country.
The study noted how traditional credit institutions, like Marup in Manipur, evolved itself in different ways to survive. Similar traditional credit systems exist among readymade garment traders of Jorhat district in Assam and in the form of Village Development Boards in Nagaland, Kebang in Arunachal Pradesh and Assam, Dorbars of Khasi and Jaintia hills in Meghalaya, Dong Committees of Bodos and Namghar Committee in Assam.
The Sa-Dhan study, making a plea for the development of the region said, “it becomes therefore imperative that all institutions desirous of seeing sustainable growth in the region recognize this and support and facilitate such an initiative by the MFIs so that the industry can go forward and be able to service 1.5 million clients (including groups) and have an outstanding of Rs 5 billion by 2011. With a demand for Rs 26 billion microfinance services for the region, it could be easily possible.”
One of the study done by M-Cril, a credit rating agency for micro-finance institutions (MFIs), shows that the northeastern India needs Rs 25,000 million. M-Cril study is based on the estimates of 2.1 million rural poor households, 3.1 million rural “not-so-poor” households, 0.4 million urban poor households and 1.2 million urban “not-so-poor” households. It said that while the poor may need credit, only 0.8 million rural “not-so-poor” households and 0.3 million urban “not-so-poor” households will need credit. M-Cril has estimated credit need of Rs 6000 per rural poor households, Rs 8000 per rural “not-so-poor” households and urban poor households and Rd 10000 per urban “not-so-poor households.