Brij Mohan

Photo of Brij Mohan

Brij Mohan (born 21 Sept, 1943) is an Indian Banker widely credited as the Father of Microfinance in India. He is a Former Executive Director of the Small Industries Development Bank of India (SIDBI) and founder of the SIDBI Foundation for Micro Credit (SFMC). He was the founding Chairman of ACCESS Development Services and has served several institutions in the microfinance and small enterprise development sectors in an advisory capacity. Brij Mohan has served on the Boards of leading microfinance support organisations, including Sa-Dhan, M-Cril, Ananya Finance, and MSC. He is also the Chairperson of the Foundation for Advancement of Micro Enterprises (FAME), a not-for-profit company set up by Aye Finance. He began the journey into Microfinance in 1994 by supporting one institution and one branch and helped grow microfinance into a very large ecosystem with 66 million+ clients, including several banks and NBFCs.

In 2022, he was awarded by the honourable Finance Minister for his lifetime contribution to the Micro Finance Sector.

Early Life and Education

Brij Mohan was born on September 21, 1943, in Ferozepur, Punjab.

His father, Master Rameshwar Dass, was an educationist who pioneered English education in Punjab and was the founder of the DC Model Schools in Punjab and Haryana. His early education was in his father’s school. He graduated from RSD College, Ferozepur, followed by an MA in Mathematics from DAV College Jalandhar. It was expected of young Brij Mohan to one day take the reins of the schools set up by his father. He worked in the school for a year before realising his destiny lies elsewhere. As a student of Maths, he applied for Indian Statistical Services. He studied for two years at the Indian Statistical Institute in Kolkata and then at Pusa Institute (IARI), specialising in Agricultural statistics.

As an officer of the Indian Statistical Service, he was posted at the Ministry of Planning. In 1976, he moved to the Planning Commission as Deputy Director of Statistics and Surveys with the Planning Commission at the age of 32. Life seems set for Brij Mohan, but the desk job needed to be more exciting.

In 1980, IDBI, then the primary Development Bank, offered an exchange program to officers of the Planning Commission – but with a caveat – posting in Mumbai but no accommodation. There were not many takers because of the accommodation issue – but Brij Mohan, by this time, was desperate enough to get out from behind the desk. He grabbed the opportunity and moved to Mumbai at considerable inconvenience to him and his family. This was his first experience with the development sector. In 1984, he resigned from his cadre of Indian Statistical Services and joined IDBI full-time.

The Story of  Microfinance in India

In 1990, IDBI decided that a separate organisation should support small industries. Small Industries Development Bank of India (SIDBI) was established in Lucknow, and Brij Mohan relocated to Lucknow as part of the initial team in charge of Industrial promotion. In this role, he first started meeting NGOs working with small entrepreneurs. These NGOs worked with small entrepreneurs and rural poor and were looking for banks to fund them for giving non-secured micro-credit to these people.

Micro-credit was familiar to India. NABARD, in the early 90s, had started supporting Self Help Groups (SHG) towards its mission of fostering rural prosperity. Brij Mohan was convinced that, while successful, SFG is not a scalable model which can attract other commercial lenders into the sector. He wanted to experiment with formal institutions in the sector. SIDBI approved an experiment to form the SIDBI Foundation for Micro Credit (SFMC) in 1994, of which Brij Mohan was the founding President. As the name “Foundation” suggests – it was separate from the commercial operations of the bank. As a pilot, SFMC issued loans to around 40 NGOs to give non-secured micro-credit to rural poor. These were short-term loans, and to the surprise of SFMC, all loans got paid back in due time. For the first time, it looked like a viable business idea – but just to be sure, SFMC asked the National Institute of Rural Development in Hyderabad to validate their hypothesis. NIRD confirmed that

·      NGO who got money from SFMC gave the money to the poor

·      The recipient of Micro-Credit actually returned the money when due.

·      The micro-credit increased the overall income of the recipient.

This was the validation of the Model. At the same, around 1998, UK AID was looking to give grants to Indian institutions to promote microcredit. The fund of £20 Million (Rs 120 Crore) was too big for SFMC, and the first proposal submitted to UK AID was rejected. The team led by Brij worked again on a revised proposal and secured the grant from UK Aid. The funds were largely unused for the next few years, as there was neither the capability nor the capacity of existing NGOs to operate at that scale. In 2003, SIDBI, under the leadership of Brij, got a team together in a room with a single-point agenda to solve this problem. The team launched a new product, “Transformation Loan”. The group believed that for the model to be viable, NGOs have to develop into a Micro Finance Institution (MFI) as an NBFC. RBI required NBFC to have a capital of Rs 2 Crore. Under the Transformation loan, SFMC offered NGOs a 6-year interest-free credit of Rs 1 crore to begin their “Transformation Journey”. During the six years, NGOs were expected to raise the rest of the money and show progress. Under the Transformation loan, SFMC had committed to covert the loan into equity if NGP displayed progress in their Journey.

This was, perhaps, the defining moment for Microfinance in India. 19 NGOs signed for the Transformation Loan. These included Bandhan (now Bandhan Bank), Janalakshmi (now Jana Small Finance Bank), Equitas (now Equitas Small Finance Bank), Ujjivan (now Ujjivan Small Finance Bank), Utkarsh (now Utkarsh Small Finance Bank) and Grameen Koota (now CreditAcess Grameen Limited). SFMC was well on its journey if making Large, Strong and sustainable microfinance institutions.

To scale the model and access more corpus than what SIDBi can provide, SFMC tried to get other commercial banks interested in giving loans to MFI. However, in the absence of any credit rating for MFI, commercial banks were unwilling to lend. EDA Rural Associates was developing innovative rating models for MFI – an initiative that evolved into M-Cril – a rating agency for MFI with Brij on the board. As the rating model matured, several commercial banks and foreign institutions started engaging with MFI.

The second problem was that of capability building. The MFI required support to develop structures, processes and systems. Sa-Dhan, a capability-building organisation primarily involved with cooperative banks, was engaged to provide capability-building to the sector.

When Brij Mohan retired from SIDBI in 2004, the MFI sector was well on its way to making a material change in alleviating rural poverty in India, with around 80-100 strong viable MFI working across India. He had offers from several MFI to join their board. However, instead of working for a particular company, he decided to work for the sector.

As the sector was growing, Brij felt a need for an organisation that could provide reporting and advisory on the sector as a whole to those who wanted to participate in this sector. Along with CARE India, he helped establish ACCESS Development Services and was its founding chairman. ACCESS served as a mirror to the industry, bringing out reports on the sector and its performance. These included the State of India ‘s Livelihood Report, Inclusive Finance Report, and Responsible Finance Report, which have become de-facto sources of planning and investments in the sector. The Microfinance Summit organised by Access is among the most well-attended summits in the sector.

Microfinance Meltdown of 2009 and Lessons Learnt

The microfinance meltdown of 2009  jolted the still-nascent sector. It was obvious that the constituency of microfinance and politicians is essentially the same – rural poor – and political interference is inevitable. Brij Mohan realised the need for some regulatory framework. As a board member of Sa-Dhan, which itslef is a self-regulatory bodu for microfinance, he lobbied with RBI to bring some regulations for the sector that can reduce political interference and enable inclusive and responsible development of the microfinance sector. This resulted in the Microfinance Institutions (Development and Regulation) Bill, 2012, being tabled, and a regulatory framework was established that defined guidelines for the maximum interest that can be charged and the maximum spread that MFI can incorporate.

Views on Poverty Alleviation and Microfinance

Brij Mohan continues to be intensely involved with the sector and continues to be on board of several capability-building organisations, including Sa-Dhan and Ananya. He is the founding Chairman of the Foundation for Advancement of Micro Enterprises (FAME) a CSR initiative of Aye Finance.

Brij Mohan sees microfinance as the only viable, scalable and sustainable way towards poverty alleviation and women empowerment in India – the two being inalienably linked.

“For me, the most inspiring thing is to see change in society as people take control of their lives. For women in particular, I have noticed that their respect within the family rises. They become part of the household decision-making in a way they had not been before. Initial loans enable women to buy a mobile phone, a bike or kitchen items like a gas cooker.

As women gain respect and self-confidence, I have seen more attention given to children’s education, especially girls. It is usual for boys to be educated, but girls often miss out on essential schooling to save on family expenses. The loans are also used to make home improvements, such as adding sanitary facilities and improving life for everyone.

In addition, interaction in groups leads to growth in dignity and self-belief, which in turn improves livelihoods. Women are empowered to take direct action whether it’s contesting elections on the village council, contacting district authorities to request improved roads, or complaining about the lack of electricity connection.”

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