In this spotlight interview, we have the privilege of talking with Professor Savita Shankar whose research on microfinance features in the Routledge-CoBS book Responsible Finance and Accounting: Performance and profit for better business, society and planet
Empowering Microentrepreneurs Through Financial Inclusion by CoBS Editor Muskan Chourey from an interiew with Professor Savita Shankar.
With a multidisciplinary background in Economics, Finance, and Public Policy, Prof. Shankar has experience working at development financial institutions, teaching in leading universities internationally and consulting for multilateral development organizations and non-profits. Her research focuses on financial inclusion and she has made several important contributions to the field through her cutting-edge research work.
Financial inclusion is a crucial aspect of economic development and has been a topic of great interest for researchers and policymakers alike. Professor Savita Shankar’s research* sheds light on the need for a more inclusive financial system for entrepreneurs. So what are the key takeaways offered by her research and what is Prof. Shankar’s vision for the future of microfinance?
Access to financial services for all
An inclusive financial system implies the availability of financial services for all income groups, with no gaps in provision. This means that all individuals, regardless of their income level, should have access to financial services such as loans, savings accounts, and insurance. This will help to reduce poverty, promote entrepreneurship, and improve overall economic growth.
Prof. Shankar explains that while progress has been made in the outreach of microfinance providers, entrepreneurs who outgrow microfinance are often not able to access larger loans. As a result, their enterprises tend to remain small and do not have the ability to grow and create more jobs. This highlights the existence of a “missing middle” between microfinance and traditional bank finance and the need for the financial system to provide more financing options to microentrepreneurs.
Based on her research, she recommends that policymakers and financial sector participants work together on initiatives that can reduce the barriers that microentrepreneurs face in accessing finance higher than the microfinance threshold.
“As microentrepreneurs are often unable to offer collateral, lending based on alternate data needs to be explored. There are already some interesting developments in this field such as the use of transaction data from e-commerce platforms, digital wallets, book-keeping applications and websites. Yet another interesting development is the use of psychometric credit scores which are based on questions relating to personality traits” says Prof. Shankar.
By exploring use of such alternate data, Prof. Shankar hopes that it will becomes easier for microentrepreneurs to access financing and scale up their businesses resulting in creation of more jobs. Those interested in this topic can subscribe to her fortnightly newsletter on financial inclusion on LinkedIn to stay informed on the latest research and developments in this field.
* ‘Bridging the “Missing Middle” between Microfinance and Small and Medium-Sized Enterprise Finance in South Asia’, Asian Development Bank Institute Working Paper No.587, July 2016
Discover The Dilemma of the “Microfinance Graduate”: The missing middle – Prof.Savita Shankar’s research included in the new book:
Responsible Finance and Accounting: Performance and Profit for Better Business, Society and Planet
- Link up with Prof. Savita Shankar on LinkedIn
- Read and subscribe to Prof. Shankar’s newsletter on financial inclusion
- Read a related article: Africa, the UN SDGs and a key role for non-bank financial institutions
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