Vijay Mahajan

Vijay Mahajan founded BASIX, a livelihood promotion institution which supports the livelihoods of over a million poor rural households in India. BASIX has created and expanded financial services, agricultural and business development, and institutional development towards sustained improvements in the lives of the rural poor.

Microcredit and microfinance have helped many enterprising poor people in economically dynamic areas escape poverty. However, for those in less hospitable regions facing a range of challenges far more daunting than the lack of access to capital, Vijay has found that a whole range of other business development services must be provided to create significant opportunities in poor rural regions. Vijay’s work is aimed at livelihood promotion, rather than microfinance (microfinance being only one tool he uses to reduce poverty and create economic opportunities for the poor). His organization, BASIX, assists a third of poor rural households directly using micro-loans and importantly, companion savings programs, insurance plans, and agricultural and business development services. The other beneficiaries are supported by over 100 citizen organizations (COs) or community based microfinance institutions to which BASIX provides assistance in funding, training, development, and operations.

Two-thirds of India’s more than 1 billion people live in rural areas, and almost half are poor. Conditions in rural areas in India can be very complex and challenging, from water shortages in the country’s semi-arid tropical region and floods in the northeast, to environmental degradation in coastal fishing communities and the loss of resources affecting tribal people in forest areas. Additionally, the people of rural communities often lack access to capital, productive assets, and financial resources. In response to the latter challenge, not unique to India, programs experimenting with extending micro-loans to groups of poor women, previously considered un-bankable, began to emerge in countries such as Bangladesh and Brazil in the 1970s. Since then, great strides have been made to prove that poor rural women are creditworthy and loaning to groups of poor people is a good investment. However, since banks in India were nationalized through the early 1990s, independent microfinance institutions did not take root. Instead, banks operated nationally-mandated efforts to extend subsidized loans to the poor that were largely ineffective—given the high rates of corruption and inordinate amounts of “red tape.” But in 1992 the situation became worse, as India began to reform and liberalize its banking system. Banks further decreased the number of loans to the rural poor because they still considered the loans less profitable. Since then, microfinance institutions (MFIs) have begun to work in India, due to the success of early examples in Bangladesh, Brazil, and beyond. However, Vijay cautions that access to microcredit alone is not a silver bullet. Poor people are poor not only because they don’t have access to money, but because they lack access to health care, employment, and education. Living in inhospitable regions, for many reasons the productive potential of the natural resources they depend are compromised. Micro-lending alone will not tackle the kind of poverty that still affects some 170 million rural Indians.

Vijay founded BASIX, an umbrella organization that provides a comprehensive set of livelihood promotion services for rural poor households in 1996. BASIX was initially funded with a ten-year loan of US$4M from the Ford Foundation and the Swiss Agency for Development and Cooperation. By successfully lobbying for changes in the Indian regulatory policy framework, BASIX became the first MFI in India (and the world) to attract commercial investments from international financial institutions such as the International Finance Corporation, Shorebank in the U.S., Triodos Bank in Holland, ICICI Bank (India’s largest private bank), and HDFC Bank (a tech-savvy commercial bank headquartered in Mumbai). Vijay’s ambitious target was to disburse microcredit to a million poor rural people in India through BASIX. Today, millions have benefited, though not in the way he initially imagined. BASIX had focused primarily on dispersing loans, but its areas of work and comprehensive focus has grown significantly in the last twelve years. When Vijay found an impact study conducted in 2002 that showed only 52 percent of their three-year plus microcredit customers reported an increase in income (23 percent reported no change, and 25 percent reported a decline), and the determined causes were unmanaged risk, low productivity in crop cultivation and livestock rearing, and an inability to set competitive prices, BASIX revised its strategy.While the new strategy still offers microcredit, it is complemented with a suite of insurance products for life, health, crops, and livestock; a range of agricultural and business development services; and, to ensure better prices, alternate market linkages to facilitate favorable input supply and output sales. Unlike most MFIs, BASIX does not loan only to the poor. Rather than be self-employed, Vijay has found that many poor people prefer to be employed. With this in mind, BASIX provides credit (through its substantial international funders), trainings, and services to MFIs and microenterprises that provide either credit or employment to the poor. BASIX tailors its products to its diverse clients—individuals or large institutions. It aggressively uses information and communication technology applications to cope with the large number of beneficiaries and maintains an expansive network of franchise agents and sales representatives. By 2006, BASIX employed more than 2,500 people as central staff and field workers in more than 7,000 villages. By late 2007, BASIX distributed US$220M through nearly 578,000 cumulative loans. Studies have shown that on average, the income of BASIX borrowers/beneficiaries increases 20 to 30 percent in just two to three years and they also generate substantial wage employment for others. Despite its size, BASIX has been able to provide personalized and attentive services to its borrowers and beneficiaries with an average repayment rate of 92 percent. When borrowers cannot repay, the cause is often beyond their immediate control and blamed on environmental factors. This is when insurance programs take effect and consulting services begin to address the problem and recommend ways for the person to move forward and recoup their losses. These programs form the complete package of livelihood promotion that BASIX has introduced and spread to more than a million people in the last ten years.

Vijay is from Jummu, India and, as a young adult, was a very successful student. He attended prestigious academic institutions in India and the U.S.—the Institute of Technology (Delhi), the Institute of Management (Ahmedabad), and the Woodrow Wilson School of Public and International Affairs at Princeton University. Vijay was on a rewarding career track in the 1970s when he took a lucrative position with Philips Global. However, studies in Gandhian ideals stirred in him the desire to do more with his life and more for others. Vijay says, “Giving up my corporate, high-profile job was inevitable…not that it was hailed by one and all, but my mind was made up.” Shocking his family and friends, Vijay moved from the U.S. back to India to work in rural economic development. In 1983, Vijay founded Professional Assistance for Development Action (PRADAN), a CO committed to improving forest-based livelihoods, natural resource management, livestock development, and microenterprise promotion. Today, PRADAN works in thirty-three districts of seven states with over 135,000 poor families. In 1996 Vijay handed over the leadership of PRADAN to start BASIX, another CO committed to promoting rural livelihoods, but with a more comprehensive focus that includes, financial services, agricultural and business development, and institutional development. Vijay is on the boards of several companies and organizations lead by social entrepreneurs and co-authored the book, The Forgotten Sector, on the rural, non-farm sector in India. He has also written more than fifty articles on rural development.