Microcredits go mobile as loans for the poor head towards $25bn

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Microfinance – making loans of just $100 to people earning a dollar a day – was pioneered by Bangladeshi Professor Muhammad Yunus (pictured) with his Grameen Bank. So far, banks have lent to microfinance institutions, leaving them to advance money to the poor.

But now hundreds of Indians have become attached to a mobile bank manager, which means they can be in direct contact with lenders. Using smart cards and handheld biometric fingerprint readers, Indian banks such as ICICI and Punjab National are now taking their services direct to India's 350 million once un-bankable people.

These cards, made by an Indian company called Fino, are revolutionising microcredit. "This has huge implications," says Moumita Sensarma, head of microfinance in India at ABN Amro. "The microfinance institutions aren't borrowers from the banks – they are agents to the banks. The record appears instantly on the books."

ABN, which lends more to Indian microfinance companies than any other bank, began developing an electronic banking system for rural India last year.

Financial institutions have invested $4bn (£2bn) in microfinance, a figure expected to hit $25bn by 2015. Private equity is also interested, backing India's three largest microfinance bodies: SKS, Spandana and Share.

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