A neurology of microfinance

Tara Thiagarajan, chairperson and managing director of Chennai-based Madura Micro Finance is flying off to the US in a few hours.

She is going there for the screening of Shakti Pirakkudu (Shakti Rising), a feature film based on the real lives and struggles of Madura's self-help group (SHG) for women. The film looks at the web of relationships that define these women's successes and failures. It is a film meant to inspire and raise aspirations, and is being shown at the South Asian literary and theatre art festival in Washington DC. The film is produced by Madura, and written and directed by Usha Rajeswari. Tara will, of course, also be meeting prospective investors.

Microfinance was not Tara's passion or area of interest. She has a PhD in neuroscience from Stanford University as well as a BA in mathematics from Brandeis University and an MBA from the Kellogg School of Management.

She is also a visiting scientist at the National Centre for Biological Sciences in Bangalore, where she works on understanding how distributed electrical activity gives rise to perception and behaviour. Circumstances brought her to microfinance .

Tara has millions of things to do before she takes off. We decide to have a quick bite at Chamiers, Chennai, a lifestyle store whose Eco Café is a tiny oasis in a buzzing, overcrowded area. Enclosed within its glass walls, you can gaze at both greenery and heavy traffic. We order healthy orange and carrot juice, which is also quite tasty. I ask Tara about the turmoil the industry is going through. Interest rates charged by most microfinance institutions have come up for steep criticism. Bank funds are drying up. Tara is quite unfazed. Madura has kept its average lending rate at less than 20% but remains profitable, with a net spread of 3%. "We use women to facilitate group meetings and compensate them for the number of meetings they organise. There are no door to door collections by agents. Women collect the payments and three representatives come to the branch and remit the amount. This keeps operating costs very low. The default rates do not exceed 1%."

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