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On Monday evening, August 31st, HSBC USA hosted a reception for Naina Lal Kidwai, Group General Manager & Country Head, HSBC India, and Mary Ellen Iskenderian, President and CEO of Women's World Banking. The topic was the challenges and opportunities facing the rapidly growing Indian microfinance sector. The conversation was moderated by Shyama Venkateswar of the National Council for Research on Women. Over 100 guests, including HSBC employees and clients, and WWB supporters were in attendance.

Two recent articles in The Wall Street Journal and The Economist about the current state of the microfinance sector in India set the stage for the lively discussion. The Journal posited that a credit bubble had formed in the sector, with too much money chasing too few clients and thus leading to reckless lending to people too poor to pay back their loans. The Economist countered that microfinance institutions in India have repayment rates of over 95%, which hardly leads to the conclusion that large numbers of borrowers are struggling with the debt they have taken on. Asked their opinion, both Kidwai and Iskenderian sided with the latter view, saying that with barely 20% of the poor in India having access to any financial services, concerns over a bubble forming are premature and should be viewed as a worst case scenario that would be brought about by widespread mismanagement in the microfinance sector. Speaking of management, they both warned that the bigger risk than credit that is facing Indian microfinance is lack of succession planning as the founders of many of the largest institutions move on. Iskenderian announced the launch of a new initiative, The Center for Microfinance Leadership, which will train CEOs and senior and mid-level managers at the world's top 200 microfinance institutions. The Center's first two trainings will be held in India in early 2010.

The two CEOs also discussed the changing nature of India's microfinance sector, which has recently overtaken Latin America in for-profit investment. Speaking from the perspective of a large global bank, Kidwai shared her opinion that investment in microfinance is just starting to gain momentum and that the future holds unlimited growth and profit potential for both the industry and investors. Iskenderian spoke about her organization’s concern that as microfinance institutions take on for-profit investors, they might be hard pressed to remain true to their original mission of serving the poor. Both agreed however that the "double bottom line" of profits and poverty alleviation will remain attractive to banks and other investors.

Finally, the conversation turned to the future of microfinance and what Kidwai described as the potential of microfinance to develop "sustainable livelihoods." She voiced expectation and hope that microfinance will eventually provide much more than credit to its clients and branch into offering other financial products and services such as insurance, savings and pension plans to help poor households build a modicum of wealth and security. Iskenderian agreed, saying that her network was focusing now on finding safe, secure means for the poor to save, and on piloting health micro-insurance products that will mitigate one of the biggest risks that poor households face, that of paying for health care.

The evening concluded on an optimistic note about India's microfinance market. Given the country's current position as a rising global leader in many areas, both speakers expressed confidence that the Indian microfinance sector will continue to grow and develop. Indeed, India is leading the way for microfinance to reach scale and sustainability around the world.