Grassroot leadership in a maturing microfinance sector

August 24, 2010 4:33 AM EDT

Understanding the nuances of finance comes naturally to the nuclear-physics-scholar-turned-CEO. “You have to be strong in number-crunching while working with Percy Bavernik, (the former chairman of ABB and also one of the major donors of Hand in Hand), who can immediately spot a flaw in a 40-page financial report,” she pointed out.

In spite of being grounded in scientific thinking to tackle poverty-related issues, Dr Kalpana Sankar, the CEO of Hand in Hand, has the spirit of a grass-root level NGO worker with a penchant for children’s education and women’s empowerment. She was drawn to the women’s self-help group movement in the mid-90s, which was a time when “women in Southern India were content calling themselves homemakers without making any contribution to the economy.”

Grass-root origins and capacity building

After having worked on various capacity building initiatives for NGOs for the Tamil Nadu Government and impact assessment projects for the World Bank, Dr Kalpana Sankar says that market linkages for micro-entrepreneurs still remains a challenge. Moreover, government –backed organisations need to be more open to criticism and feedback. Nonetheless, the Government still has a catalyzing role to play for Hand in Hand, which is extensively involved in the bank-SHG linkage scheme, she adds.

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Underscoring the importance of leveraging the existing democratic infrastructure for promoting human development, she narrated how Hand in Hand made 600 panchayats in Tamil Nadu child-friendly. “We made the panchayats understand the importance of rights protection and good governance.” When asked about the major feats of her organisation, she described with alacrity how 48,000 children across Tamil Nadu were admitted into schools through Hand in Hand’s intervention.

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“In our residential schools, 48%-50 of the children are from Dalit and tribal families. We are also educating children from migrant gypsy families, and my dream is that one of them should go on to write the civil service exams .”

Social and financial performance – a tight rope walk

Hand in Hand now has an MFI-NBFC arm Belstar. Dr Kapana Sankar affirms that Belstar, which has received funding from IFC besides other donors, will continue to fulfil the social mission of Hand in Hand to empower low income groups with an accent on enterprise creation and the provision of emergency loans. Belstar will only be funded by social investors who can provide appropriate technical assistance. She also pointed out that Hand in Hand’s board of trustees constantly emphasize on social auditing and transparency in governance.

Hand in Hand is now backing self-help groups in Karnataka, Madhya Pradesh and Orissa. The journey into the most backward tribal areas of Madhya Pradesh has had a lasting impression on the NGO head. Healthcare and childcare facilities are almost negligible in such areas and most families live merely on one square meal a day. This has strengthened her resolve to make financial inclusion a reality for those living in the most under-developed districts of the country.

However, in a maturing microfinance sector where more NGOs morph into NBFCs, can the leader of an MFI have the mind of a CFO and the heart of a social activist? Kalpana Sankar admits that balancing social performance with financial performance targets is indeed a tight rope walk. Nonetheless, she has come to terms with the drastic changes in the microfinance space, wherein more IPOs and private equity funding seem imminent. An IPO with a valuation, which is profitable for the MFI’s mutual benefit trusts (MBTs), would not necessarily lead to a mission drift.

On going global and glass ceilings

Hand in Hand India’s self-help group methodology has been successfully replicated across Afghanistan and Brazil under Kalpana Sankar’s stewardship. Noting that TCS has helped develop a credit bureau in Latin America, she pitched for the establishment of microfinance credit bureau with adequate IT infrastructure in India.

On the emergence of a glass ceiling in the microfinance sector amid rapid commercialisation, she says more women managers in MFIs should take on the challenges in the competitive environment by getting trained in financial management and accounting. Women leaders/ managers in India, according to her, still face social constraints while lobbying and networking professionally. “It is still a man’s world in the microfinance sector, and a mistake committed by a woman can be blown out of proportion.” One has to tread with equanimity and remain thick-skinned in times of fund-raising, she opined.

(Disclaimer: By arrangement with Microfinance Focus. All copy rights reserved by Microfinance Focus. International Business Times is not responsible for any omissions or commissions in the article.)