Ever since microfinance became a dirty name - seen as a driver of suicides and the subsequent harsh legislative measures in Andhra Pradesh - microfinance institutions have been struggling to survive.
The new regulations by the Reserve Bank of India on microfinance have prompted MFIs to go for a makeover, in order to cope with the new limitations imposed on them.
While some are going for product finance and morphing into non-banking financial companies that can finance anything, others are rigidly staying on in the terrain of offering small credit to the poor in rural and urban India.
Six months ago, Sonata Microfinance in Uttar Pradesh tied up with Hero Cycles and began selling cycles to people in 10,000 villages, accepting payments in instalments.
About 500 villagers in Allahabad district of Uttar Pradesh have got Hero cycles worth Rs 3,000, and are repaying in instalments. These men were casual labourers, petty retailers, milk men, etc.
We hope to give another 1,000 cycles in the second batch, says Sanjay Singh of Hero Cycles, who sees cycles as means of enhancing their customers' income and an additional means of livelihood for many.
Sonata has also supplied cooking stoves to around 115,000 villagers.
MFIs in southern India are changing shape even more rapidly. Spandana, which was in the eye of the worst storm against MFIs in Andhra Pradesh, has replaced its lending activities with selling tractors on instalments.
The business, which was confined to Andhra Pradesh, has been extended to Karnataka and Maharashtra, and has plans to enter Madhya pradesh soon. About 10,000 tractors have been financed so far in two years.
It is also giving loans against pawned gold jewellery, where it does not stand to lose money the way it did with money lending.
SKS Microfinance, the first and only Indian MFI to have an initial public offer, is likely to move into retail.
It is said to be tying up with a cash-and-carry chain to finance customers. Bandhan, which is already an NBFC, is not bothered by the RBI regulations and is focussing on what it calls its anti-poverty agenda.
They have become the agents for the government's New Pension Scheme for the unorganised sector and have already enrolled 100,000 of their clients under the scheme.
Ghosh says it will help a poor woman get at least a monthly pension of Rs 1,000 and some money in bulk, if something was to happen to her husband.
By March, it will cover 200,000 people, he adds. Ghosh is also doing a grant-based programme for the very poor and is not lured by product finance.
I would not burden the poor with products they don't need, he says. Another MFI Equitas is all set to make money lending a small part of its portfolio. It has multiplied into three entities to stay afloat.
Managing Director P N Vasudevan says organisations were merely doing what they wanted to do.
Equitas is financing used commercial vehicles and houses now. But, there are some who have chosen to remain MFIs in the strict sense.
Grameen Koota, with operations in three states - Tamil Nadu, Karnataka and Maharashtra - has chosen to remain an NBFC MFI with money lending as its main activity.
Managing Director Sri Krishna says it has no problem with the RBI cap of 26 per cent interest and loan size of Rs 50,000.
It even dreams of having an IPO in the next four or five years. We will tap other sources of domestic funds via the proposed MFI equity fund and work towards an IPO, which is another good source for domestic funding, he says.
He still doesn't accept the critique of microfinance. You cannot criticise it without creating a conducive atmosphere for it to function in an honest manner, he says.