Deprecated (16384): The ArrayAccess methods will be removed in 4.0.0.Use getParam(), getData() and getQuery() instead. - /home/brlfuser/public_html/src/Controller/ArtileDetailController.php, line: 150
 You can disable deprecation warnings by setting `Error.errorLevel` to `E_ALL & ~E_USER_DEPRECATED` in your config/app.php. [CORE/src/Core/functions.php, line 311]
Code Context


        trigger_error($message, E_USER_DEPRECATED);

    }
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 You can disable deprecation warnings by setting `Error.errorLevel` to `E_ALL & ~E_USER_DEPRECATED` in your config/app.php.'
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deprecationWarning - CORE/src/Core/functions.php, line 311
Cake\Http\ServerRequest::offsetGet() - CORE/src/Http/ServerRequest.php, line 2421
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Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
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Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Http\Runner::run() - CORE/src/Http/Runner.php, line 51
Cake\Http\Server::run() - CORE/src/Http/Server.php, line 98

Deprecated (16384): The ArrayAccess methods will be removed in 4.0.0.Use getParam(), getData() and getQuery() instead. - /home/brlfuser/public_html/src/Controller/ArtileDetailController.php, line: 151
 You can disable deprecation warnings by setting `Error.errorLevel` to `E_ALL & ~E_USER_DEPRECATED` in your config/app.php. [CORE/src/Core/functions.php, line 311]
Code Context


        trigger_error($message, E_USER_DEPRECATED);

    }
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 You can disable deprecation warnings by setting `Error.errorLevel` to `E_ALL & ~E_USER_DEPRECATED` in your config/app.php.'
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deprecationWarning - CORE/src/Core/functions.php, line 311
Cake\Http\ServerRequest::offsetGet() - CORE/src/Http/ServerRequest.php, line 2421
App\Controller\ArtileDetailController::index() - APP/Controller/ArtileDetailController.php, line 151
Cake\Controller\Controller::invokeAction() - CORE/src/Controller/Controller.php, line 610
Cake\Http\ActionDispatcher::_invoke() - CORE/src/Http/ActionDispatcher.php, line 120
Cake\Http\ActionDispatcher::dispatch() - CORE/src/Http/ActionDispatcher.php, line 94
Cake\Http\BaseApplication::__invoke() - CORE/src/Http/BaseApplication.php, line 235
Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Routing\Middleware\RoutingMiddleware::__invoke() - CORE/src/Routing/Middleware/RoutingMiddleware.php, line 162
Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
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Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Error\Middleware\ErrorHandlerMiddleware::__invoke() - CORE/src/Error/Middleware/ErrorHandlerMiddleware.php, line 96
Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Http\Runner::run() - CORE/src/Http/Runner.php, line 51
Cake\Http\Server::run() - CORE/src/Http/Server.php, line 98

Warning (512): Unable to emit headers. Headers sent in file=/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Error/Debugger.php line=853 [CORE/src/Http/ResponseEmitter.php, line 48]
Code Context
            if (Configure::read('debug')) {

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        LATEST NEWS UPDATES | Malegam report to hurt microfinance by Krishnamurthy Subramanian    </title>
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An empirical analysis of the microfinance industry shows that the recommendations of the Malegam committee would have significantly more detrimental consequences than have been anticipated in the report. The microfinance exchange (www.mixmarket.org) is the most comprehensive data source for MFIs..."/>
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                            <div align="justify">An empirical analysis of the microfinance industry shows that the recommendations of the Malegam committee would have significantly more detrimental consequences than have been anticipated in the report. The microfinance exchange (www.mixmarket.org) is the most comprehensive data source for MFIs across the world. Table 1 displays the information on several parameters of Indian MFI performance for 2009. Column 2 displays the average values of performance parameters across 88 Indian MFIs. I classify MFIs into four separate quartiles based on their assets. Columns 3 to 6 report the average value of the performance parameters for the smallest, small, large and largest MFIs, which correspond to the four quartiles sorted by the increasing order of their size.<br /><br />The most important fact revealed by these numbers is that MFI profitability, as seen in the return on assets and return on equity, ramps up with increase in the MFI size. While the smallest MFIs are bleeding red, the largest MFIs are quite profitable as seen in their return on equity.<br /><br />As witnessed in the capital/assets ratio, we find that the smaller MFIs employ greater capital for every rupee of asset they create. The smallest MFIs take on considerably more debt and are, therefore , exposed to considerably more risk than their larger counterparts. These differences in capital employed and the risk profile translate into greater financial expenses as seen in the higher ratio of financial expense/assets for the smallest MFIs.<br /><br />Each four categories of MFIs lends about the same amount to the average borrower. The financial revenue generated by an MFI per rupee of asset is almost identical across the four categories of MFIs. Furthermore , the nominal yield on the loan portfolio is also similar. However, the smallest MFIs have almost double the operating expense per rupee of asset when compared to the largest MFIs. The operating expenseto-asset ratio decreases primarily due to the benefits of economies of scale.<br /><br />One recommendation is to cap MFI lending rates at 24%. The average loan rate charged by MFIs has been around 29-30 %. The cap would push down the interest revenue generated by MFIs by about 20% compared to the actual for 2009.<br /><br />Second, the recommendations will push up operating expenses. An MFI will have to verify/ensure: (i) the borrower&rsquo;s household income is below . 50,000 per annum, (ii) the borrower is a member of only one SHG or JLG, (iii) the borrower has a loan from, at most, only one MFI, (iv) after the second MFI&rsquo;s loan, the total amount outstanding will not exceed . 25,000, (v) the borrower will not use more than 25% of the loan amount for non-income generation purposes, and sanction and disburse this loan under the supervision of senior staff, and collect repayments only at a designated central place in a village/slum. Each requirement will increase the operating expenses for MFIs by at least 20%. In case the borrower does not come to repay, the MFI cannot send anyone to the borrower because such a practice would be treated as coercion , hurting the chances of repayment.<br /><br />Since the source of funds would be the same, the financial expense-to-asset ratios would not change. Ditto for other expenses /assets. Using these projections, we find that the average MFI will generate a return on asset of -6 .15% compared with the 0.25% in 2009. All categories of MFIs are likely to become unprofitable. Even the largest MFIs will generate a return on assets of about -2 .26%, with the other lower-sized MFIs being even more unprofitable . The impact on the entire population of MFIs will only be worse than what has been projected here because the MFIs who do not report their data are likely to fare worse than the ones that do.<br /><br />Since operating costs constitute the bulk of an MFI&rsquo;s costs, their survival will depend on their ability to follow the onerous requirements while keeping operating costs down simultaneously. It is possible that the largest MFIs would survive. However, it is amply clear that the smallest, small and even the large MFIs will find it exceedingly difficult to operate viably in the altered scenario.<br /><br /><em>(The author is assistant professor of finance , Indian School of Business) </em><br /></div>                                                           
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    <br><a href="http://economictimes.indiatimes.com/opinion/comments-analysis/malegam-report-to-hurt-microfinance/articleshow/7449585.cms" class="re" target="_blank">The Economic Times, 8 February, 2011, http://economictimes.indiatimes.com/opinion/comments-analysis/malegam-report-to-hurt-microfinance/articleshow/7449585.cms</a><div class="clear"></div>
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    <h1 class="cat-box-title">Malegam report to hurt microfinance by Krishnamurthy Subramanian</h1>
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		 Published on</span><span class="text-date"> Feb 9, 2011</span>
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                            <div align="justify">An empirical analysis of the microfinance industry shows that the recommendations of the Malegam committee would have significantly more detrimental consequences than have been anticipated in the report. The microfinance exchange (www.mixmarket.org) is the most comprehensive data source for MFIs across the world. Table 1 displays the information on several parameters of Indian MFI performance for 2009. Column 2 displays the average values of performance parameters across 88 Indian MFIs. I classify MFIs into four separate quartiles based on their assets. Columns 3 to 6 report the average value of the performance parameters for the smallest, small, large and largest MFIs, which correspond to the four quartiles sorted by the increasing order of their size.<br /><br />The most important fact revealed by these numbers is that MFI profitability, as seen in the return on assets and return on equity, ramps up with increase in the MFI size. While the smallest MFIs are bleeding red, the largest MFIs are quite profitable as seen in their return on equity.<br /><br />As witnessed in the capital/assets ratio, we find that the smaller MFIs employ greater capital for every rupee of asset they create. The smallest MFIs take on considerably more debt and are, therefore , exposed to considerably more risk than their larger counterparts. These differences in capital employed and the risk profile translate into greater financial expenses as seen in the higher ratio of financial expense/assets for the smallest MFIs.<br /><br />Each four categories of MFIs lends about the same amount to the average borrower. The financial revenue generated by an MFI per rupee of asset is almost identical across the four categories of MFIs. Furthermore , the nominal yield on the loan portfolio is also similar. However, the smallest MFIs have almost double the operating expense per rupee of asset when compared to the largest MFIs. The operating expenseto-asset ratio decreases primarily due to the benefits of economies of scale.<br /><br />One recommendation is to cap MFI lending rates at 24%. The average loan rate charged by MFIs has been around 29-30 %. The cap would push down the interest revenue generated by MFIs by about 20% compared to the actual for 2009.<br /><br />Second, the recommendations will push up operating expenses. An MFI will have to verify/ensure: (i) the borrower&rsquo;s household income is below . 50,000 per annum, (ii) the borrower is a member of only one SHG or JLG, (iii) the borrower has a loan from, at most, only one MFI, (iv) after the second MFI&rsquo;s loan, the total amount outstanding will not exceed . 25,000, (v) the borrower will not use more than 25% of the loan amount for non-income generation purposes, and sanction and disburse this loan under the supervision of senior staff, and collect repayments only at a designated central place in a village/slum. Each requirement will increase the operating expenses for MFIs by at least 20%. In case the borrower does not come to repay, the MFI cannot send anyone to the borrower because such a practice would be treated as coercion , hurting the chances of repayment.<br /><br />Since the source of funds would be the same, the financial expense-to-asset ratios would not change. Ditto for other expenses /assets. Using these projections, we find that the average MFI will generate a return on asset of -6 .15% compared with the 0.25% in 2009. All categories of MFIs are likely to become unprofitable. Even the largest MFIs will generate a return on assets of about -2 .26%, with the other lower-sized MFIs being even more unprofitable . The impact on the entire population of MFIs will only be worse than what has been projected here because the MFIs who do not report their data are likely to fare worse than the ones that do.<br /><br />Since operating costs constitute the bulk of an MFI&rsquo;s costs, their survival will depend on their ability to follow the onerous requirements while keeping operating costs down simultaneously. It is possible that the largest MFIs would survive. However, it is amply clear that the smallest, small and even the large MFIs will find it exceedingly difficult to operate viably in the altered scenario.<br /><br /><em>(The author is assistant professor of finance , Indian School of Business) </em><br /></div>                                                           
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    <br><a href="http://economictimes.indiatimes.com/opinion/comments-analysis/malegam-report-to-hurt-microfinance/articleshow/7449585.cms" class="re" target="_blank">The Economic Times, 8 February, 2011, http://economictimes.indiatimes.com/opinion/comments-analysis/malegam-report-to-hurt-microfinance/articleshow/7449585.cms</a><div class="clear"></div>
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        LATEST NEWS UPDATES | Malegam report to hurt microfinance by Krishnamurthy Subramanian    </title>
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An empirical analysis of the microfinance industry shows that the recommendations of the Malegam committee would have significantly more detrimental consequences than have been anticipated in the report. The microfinance exchange (www.mixmarket.org) is the most comprehensive data source for MFIs..."/>
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An empirical analysis of the microfinance industry shows that the recommendations of the Malegam committee would have significantly more detrimental consequences than have been anticipated in the report. The microfinance exchange (www.mixmarket.org) is the most comprehensive data source for MFIs..." />
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    <h1 class="cat-box-title">Malegam report to hurt microfinance by Krishnamurthy Subramanian</h1>
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		 Published on</span><span class="text-date"> Feb 9, 2011</span>
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                            <div align="justify">An empirical analysis of the microfinance industry shows that the recommendations of the Malegam committee would have significantly more detrimental consequences than have been anticipated in the report. The microfinance exchange (www.mixmarket.org) is the most comprehensive data source for MFIs across the world. Table 1 displays the information on several parameters of Indian MFI performance for 2009. Column 2 displays the average values of performance parameters across 88 Indian MFIs. I classify MFIs into four separate quartiles based on their assets. Columns 3 to 6 report the average value of the performance parameters for the smallest, small, large and largest MFIs, which correspond to the four quartiles sorted by the increasing order of their size.<br /><br />The most important fact revealed by these numbers is that MFI profitability, as seen in the return on assets and return on equity, ramps up with increase in the MFI size. While the smallest MFIs are bleeding red, the largest MFIs are quite profitable as seen in their return on equity.<br /><br />As witnessed in the capital/assets ratio, we find that the smaller MFIs employ greater capital for every rupee of asset they create. The smallest MFIs take on considerably more debt and are, therefore , exposed to considerably more risk than their larger counterparts. These differences in capital employed and the risk profile translate into greater financial expenses as seen in the higher ratio of financial expense/assets for the smallest MFIs.<br /><br />Each four categories of MFIs lends about the same amount to the average borrower. The financial revenue generated by an MFI per rupee of asset is almost identical across the four categories of MFIs. Furthermore , the nominal yield on the loan portfolio is also similar. However, the smallest MFIs have almost double the operating expense per rupee of asset when compared to the largest MFIs. The operating expenseto-asset ratio decreases primarily due to the benefits of economies of scale.<br /><br />One recommendation is to cap MFI lending rates at 24%. The average loan rate charged by MFIs has been around 29-30 %. The cap would push down the interest revenue generated by MFIs by about 20% compared to the actual for 2009.<br /><br />Second, the recommendations will push up operating expenses. An MFI will have to verify/ensure: (i) the borrower&rsquo;s household income is below . 50,000 per annum, (ii) the borrower is a member of only one SHG or JLG, (iii) the borrower has a loan from, at most, only one MFI, (iv) after the second MFI&rsquo;s loan, the total amount outstanding will not exceed . 25,000, (v) the borrower will not use more than 25% of the loan amount for non-income generation purposes, and sanction and disburse this loan under the supervision of senior staff, and collect repayments only at a designated central place in a village/slum. Each requirement will increase the operating expenses for MFIs by at least 20%. In case the borrower does not come to repay, the MFI cannot send anyone to the borrower because such a practice would be treated as coercion , hurting the chances of repayment.<br /><br />Since the source of funds would be the same, the financial expense-to-asset ratios would not change. Ditto for other expenses /assets. Using these projections, we find that the average MFI will generate a return on asset of -6 .15% compared with the 0.25% in 2009. All categories of MFIs are likely to become unprofitable. Even the largest MFIs will generate a return on assets of about -2 .26%, with the other lower-sized MFIs being even more unprofitable . The impact on the entire population of MFIs will only be worse than what has been projected here because the MFIs who do not report their data are likely to fare worse than the ones that do.<br /><br />Since operating costs constitute the bulk of an MFI&rsquo;s costs, their survival will depend on their ability to follow the onerous requirements while keeping operating costs down simultaneously. It is possible that the largest MFIs would survive. However, it is amply clear that the smallest, small and even the large MFIs will find it exceedingly difficult to operate viably in the altered scenario.<br /><br /><em>(The author is assistant professor of finance , Indian School of Business) </em><br /></div>                                                           
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    <br><a href="http://economictimes.indiatimes.com/opinion/comments-analysis/malegam-report-to-hurt-microfinance/articleshow/7449585.cms" class="re" target="_blank">The Economic Times, 8 February, 2011, http://economictimes.indiatimes.com/opinion/comments-analysis/malegam-report-to-hurt-microfinance/articleshow/7449585.cms</a><div class="clear"></div>
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Malegam report to hurt microfinance by Krishnamurthy Subramanian

Published on Feb 9, 2011   Modified on Feb 9, 2011

An empirical analysis of the microfinance industry shows that the recommendations of the Malegam committee would have significantly more detrimental consequences than have been anticipated in the report. The microfinance exchange (www.mixmarket.org) is the most comprehensive data source for MFIs across the world. Table 1 displays the information on several parameters of Indian MFI performance for 2009. Column 2 displays the average values of performance parameters across 88 Indian MFIs. I classify MFIs into four separate quartiles based on their assets. Columns 3 to 6 report the average value of the performance parameters for the smallest, small, large and largest MFIs, which correspond to the four quartiles sorted by the increasing order of their size. The most important fact revealed by these numbers is that MFI profitability, as seen in the return on assets and return on equity, ramps up with increase in the MFI size. While the smallest MFIs are bleeding red, the largest MFIs are quite profitable as seen in their return on equity. As witnessed in the capital/assets ratio, we find that the smaller MFIs employ greater capital for every rupee of asset they create. The smallest MFIs take on considerably more debt and are, therefore , exposed to considerably more risk than their larger counterparts. These differences in capital employed and the risk profile translate into greater financial expenses as seen in the higher ratio of financial expense/assets for the smallest MFIs. Each four categories of MFIs lends about the same amount to the average borrower. The financial revenue generated by an MFI per rupee of asset is almost identical across the four categories of MFIs. Furthermore , the nominal yield on the loan portfolio is also similar. However, the smallest MFIs have almost double the operating expense per rupee of asset when compared to the largest MFIs. The operating expenseto-asset ratio decreases primarily due to the benefits of economies of scale. One recommendation is to cap MFI lending rates at 24%. The average loan rate charged by MFIs has been around 29-30 %. The cap would push down the interest revenue generated by MFIs by about 20% compared to the actual for 2009. Second, the recommendations will push up operating expenses. An MFI will have to verify/ensure: (i) the borrower’s household income is below . 50,000 per annum, (ii) the borrower is a member of only one SHG or JLG, (iii) the borrower has a loan from, at most, only one MFI, (iv) after the second MFI’s loan, the total amount outstanding will not exceed . 25,000, (v) the borrower will not use more than 25% of the loan amount for non-income generation purposes, and sanction and disburse this loan under the supervision of senior staff, and collect repayments only at a designated central place in a village/slum. Each requirement will increase the operating expenses for MFIs by at least 20%. In case the borrower does not come to repay, the MFI cannot send anyone to the borrower because such a practice would be treated as coercion , hurting the chances of repayment. Since the source of funds would be the same, the financial expense-to-asset ratios would not change. Ditto for other expenses /assets. Using these projections, we find that the average MFI will generate a return on asset of -6 .15% compared with the 0.25% in 2009. All categories of MFIs are likely to become unprofitable. Even the largest MFIs will generate a return on assets of about -2 .26%, with the other lower-sized MFIs being even more unprofitable . The impact on the entire population of MFIs will only be worse than what has been projected here because the MFIs who do not report their data are likely to fare worse than the ones that do. Since operating costs constitute the bulk of an MFI’s costs, their survival will depend on their ability to follow the onerous requirements while keeping operating costs down simultaneously. It is possible that the largest MFIs would survive. However, it is amply clear that the smallest, small and even the large MFIs will find it exceedingly difficult to operate viably in the altered scenario. (The author is assistant professor of finance , Indian School of Business)

The Economic Times, 8 February, 2011, http://economictimes.indiatimes.com/opinion/comments-analysis/malegam-report-to-hurt-microfinance/articleshow/7449585.cms

Tagged with: Microfinance

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