Microfinance as a facilitator to cut the vicious cycle of poverty and lay out a clear direction towards capacity creation for triggering a revenue stream as an instrument for development has been debated in all its nuances. Yes, it is also true that despite the decades of debate there are still areas that need to be thought through. This is only natural as the perspective of the relevance of microfinance is dynamic and changes in sync with the changing economic and technological reality.

The current idea that is almost about to put a blinker at the level of implementation is the thought that the tremendous progress made in the realm of technology will make human intervention irrelevant in the microfinance industry The argument is that, technology by itself will lend its might so overwhelmingly as to make what we at the microfinance industry are doing through ground level direct engagement irrelevant.

This is a thought that doesn’t get supported by the reality and experience of the industry as this idea of rejecting the need for human interaction tends to ignore the reality at the beneficiary level. The requirement of the human engagement is dictated by the quality of the functional level of literacy. In the current complex social situation, knowing the alphabet and the ability to put signature on documents don’t count as literacy. The definition of functional literacy assumes understanding of the material read. And the financial inclusion requires financial literacy and access to financial products. Add the requirement of business and fit that into the swath and you will start realising the need for the spread of the engagement required for the microfinance customers.

To illustrate the logic of the situation let us take the case of a beneficiary or a customer who supplements the family’s income by rearing goats. If she needs a loan to expand she will have to repay it. But given her station in life the requirements that she needs to satisfy to obtain the loan is beyond her skill. Training and financial judgment will be key in her case. And no digital intervention can make the need for human interaction redundant in cases of this nature. The microfinance industry is therefore compelled to dedicate itself not merely to disbursement of loan to help create economic capacity but is also required to lend its hand in creating human resource without which economic capacity creation will remain a pipedream. In other words, the model followed in this segment focuses on her functional literacy as well.

There is an indirect statistical support to what I have reasoned. The fact that human intervention is so relevant is supported by the growth statistics contained in the MFIN Micrometer, March, 2018 issue. It says that the loan outstanding growth in FY 2017-18 compared to the previous year for banks has been 23 per cent. Compared to that NBFC-MFIs (excluding banking correspondents) have chalked up a figure of an impressive 48 per cent. This can be straightway attributed to the model of handholding that the NBFC-MFIs follow.

Therefore while the evolving digital technology may help connect, but when it comes to addressing the social roadblocks like literacy that stands in the way of cutting the Gordian knot of vicious cycle of poverty in the subcontinent, human intervention still holds the key.