There is no free lunch in this world. Even in charities there are costs. And then we all know that we tend not to appreciate a freebie as much as we would have had we been made to bear the cost.

Traditionally we are not used to thinking that social welfare may not be in conflict with a profit seeking operation. And someone believing that to a point of obsession may not be entirely faulted either. The instances of society feeling challenged by the operations of a specific company’s operations are far too many to be just wished off. But the guilt of a few cannot be held as evidence of crime against all corporates. Unfortunately, however, logic and evidence notwithstanding, the inclination to think to the contrary is far too strong in the minds of the people for the logic to win.

In the case of operations focused on finance the feeling is even more entrenched – specially in the cases of the companies operating in the rural areas. In this specific instance, public perception has been colored by the operations of unscrupulous money-lenders who have traditionally and for ages held the hapless poor in their ruthless clutches.

And this perception has indeed not been a particularly easy thing to contend with for microfinance operations. Microfinance was introduced and specific rules framed for their operations for the purpose of rural development with a focus on alleviation of poverty. The goal here is to create enterprise capacity at the grassroots levels at a sustainable level so that through creation of direct and indirect employment, the country gets to address the plague of poverty without direct intervention from the government agencies.

The premise on the basis of which the whole concept took off was the belief that the poor are the greatest entrepreneurs. It’s argued that the way the poor fight to survive every day of their life needs a great degree of innovativeness. Without the innovativeness the uncertainty of procuring the necessities of life on a daily basis cannot be met. A business operation is also about meeting challenges to survive, sustain and grow.

The premise that flowed from it was that circumstances make the poor to face challenges innovatively on a daily basis. Given the fact that they are used to the basis requirement of entrepreneurship, the remaining components for turning them into business persons are access to finance and training them into putting the funds accessed into productive use. They may require to be provided with literacy specific to their needs.

The trick was to innovate a structure that would be a one-stop shop for a) easy access to finance, b) monitoring the use of funds lent out, c) facilitating expansion of knowledge capacity at the grassroots, d) empowerment in its broadest sense of the term.

Experiments with delivering on these requirements through a multitude of agencies – regional rural banks, rural banks, cooperative banks, literacy missions, except for the last, all operating on cost plus basis – having failed to deliver the desired results, the microfinance model was pushed. The equation was simple. A cost plus model of delivery will not strain the government coffer and as a consequence the taxpayers’ purse and it will be a win win situation. The model that has evolved makes it, from the pure business point of view, a compulsion for the microfinance units to ensure that their customers productively use the borrowed funds. If they don’t they won’t be able to pay back and microfinance units would run up NPAs. So the system itself has built-in efficiency driver and deliverables need to be ensured to avoid closure.

“There is no free lunch” model therefore is not only win win, it’s also a sustainable model to create a solution to fight the curse of poverty. It’s here therefore like any many other properly crafted business policy environment profitability and social welfare shake hands.