It has been lauded as one of the most promising ways of using the market to reduce poverty and boost economies in some of the world's most deprived areas. But in recent months the work of microfinance institutions (MFIs), which provide small loans to poor people with no access to traditional banking services, has come under scrutiny after a spate of suicides in the Indian province of Andhra Pradesh was linked...
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New draft of MFI Bill to give more teeth to RBI by Dinesh Unnikrishnan
The earlier draft covered only non-NBFC MFIs incorporated as trusts and non-governmental organizations that constitute a very small part of the total industry The proposed microfinance Bill for governing India’s Rs. 22,000 crore microlending industry is set to give more teeth to the Reserve Bank of India (RBI) to regulate larger microfinance institutions (MFIs). This will be done by removing such entities from the purview of laws enacted by state governments...
More »No cap on MFI interest rates by Shishir Arya
Amidst hue and cry over micro-finance institutions (MFIs) charging the rural poor exorbitant interest rates, Reserve Bank of India norms continue to allow these entities a free hand in determining their charges. The banks lending to MFIs too continue to have full discretion in fixing their rate of interest. RBI has issued a latest master circular reiterating its earlier stand on micro-credit on February 14. Master circulars are like ready-reckoners on...
More »ADB plans to set up $250 mn guarantee fund for microfinance by Aveek Datta and Anup Roy
India’s microfinance institutions (MFIs), under pressure because of stricter rules in their largest market Andhra Pradesh and the consequent slump in repayments there, may get a boost from the Asian Development Bank (ADB). ADB is constituting a $250 million (around Rs1,135 crore) facility to offer guarantees against loans to MFIs extended by banks in the Asia-Pacific region where it operates, including India. The move is aimed at encouraging banks to lend...
More »Malegam report to hurt microfinance by Krishnamurthy Subramanian
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....
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