United Micro Credit India: More Than Your Average Microcredit Institution

The growth of the microfinance industry over the past few decades has produced a trend in organizations transitioning from nonprofit to for-profit microfinance institutions. The justification for this centers on the need for a consistent flow of funds to expand operations and outreach; for-profits have access to capital markets, which eliminate the need to compete for grants and donations. While this justification is legitimate, the result of the transition to for-profit institutions has been a significant amount of mission drift: with the contributions of private investors comes a heightened pressure to achieve desirable returns, and less pressure to focus on poverty alleviation. Along with various other factors, this mission drift manifested itself in the 2010 microcredit crisis in Andhra Pradesh.

Though his business model traditionally does not allow the sort of growth that many for-profit institutions have been able to achieve, for Bharani, it is not about the quantity impacted, but rather the quality of the impact. “We don’t look at the numbers,” says Bharani. “We don’t care if we have 20,000 clients, we want clients who are motivated to do a business, and from that business they will earn an income, and with that income they can support their family and also repay us.”

By concentrating their efforts, United Micro Credit is able to carefully monitor their loans, an area that proved to be a shortcoming for many large microfinance institutions. This close attention prevents a mismanagement of loan funds, and discourages borrowers from using loans for personal reasons or for the repayment of other debts. “We target the customers who are interested primarily in starting a business,” explains Bharani, “We want people to be able to repay the money; we don’t want people to be in debt.”

To encourage the responsible handling of debt, United Micro Credit works with its clients to educate them on basic financial management strategies. According to Bharani, the result of this training has been their greatest achievement as an organization thus far.

“[We have given] women the financial knowledge, to not rotate money, to make sure they are not using it for any other purpose,” Bharani explains. “Most women who are using this money wisely are able to make their families happy, make extra income, provide education for their kids.”

Although the company’s core business is lending to the poor, to say that it is strictly a microcredit organization would be to drastically understate the extent of its operations. As Bharani describes, United Micro Credit is a social, economic, and environmental organization and designs its services around all three facets. Beyond its micro lending, United Micro Credit has programs designed to promote education, environmental awareness, and community involvement.

The list goes on. United Micro Credit is looking to work with students who have failed in school to convince them not to drop out, and that they have a second chance. They are working to set up eco-clubs in schools to promote environmental awareness and to teach the importance of preserving the environment for future generations. To spread the importance of service and community involvement, United Micro Credit is working to set up community service initiatives in colleges, to expose students to the less well-off members of society and to help them understand their needs.

In one of its more exciting projects, United Micro Credit recently partnered with Paperman for its Paper Revolution initiative. “Every time people use paper they throw it away, and don’t think of recycling it,” Bharani explained. “What we are trying to tell the next generation is that they need to preserve the environment.” Throughout the program, students collect paper and sell it to the local paper recycler. All of the money raised is donated to Nanhi Kali, a project managed by KC Mahindra Trust and the Naandi Foundation to promote education of underprivileged girls.

With such a multifaceted approach to impact, it is clear that United Micro Credit is more than your average microcredit institution. Despite the breadth of their outreach, however, when it comes to lending, United Micro Credit holds to the belief that quality is more important than quantity. In the wake of the 2010 crisis that drew heavy criticism of the microfinance industry, United Micro Credit serves as a welcomed reminder of the potential microfinance holds when it retains its values and is used as a means of poverty alleviation rather than profiteering.

Learn more about United Micro Credit here or visit them on Facebook.