In response to Devinder Sharma's questions

Devinder Sharma has replied to Lokesh Singh’s post on his blog here.

Given below is Lokesh Singh’s Response

Dear Mr. Sharma,

Thanks a lot for acknowledging my response to your article.

As you have divulged in your response that there are some concerned microfinancers as well who share your concern about providing low cost finance available to the people who are at the bottom of the social strata but you would agree with me that concern alone would not do much.

As you have rightly given some anchors for me to rest my argument as you say that loans of Rs. 5 lacs and above are available at 8.5% which can be true because anyone from financial services worth his/her salt would agree that the transaction cost involved in analyzing loan application of Rs. 5 lacs and Rs. 5,000 is not exactly a multiple of 100 but not more than 10 which makes the smaller loans costly to process as well as costlier to service. If you add the cost of funds for the MFIs as they do not mobilize savings, which comes about 13% in current situation. If you add all this there is no way any organization can operate below 22% or so untill and unless it is owned by someone going by the name of Bill Gates.

I understand that there are some inefficiencies which can be dealt with but pointless criticism would not achieve anything.

My sincere suggestion would be for you to read little more about micro finance. If you still think that there is scope for some innovations which would bring the ultimate cost for the poor down then please do it yourselves. When you soil your hands then your insights will be much more powerful and constructive in nature rather than being pure arguments. We shall be happy to extend any help from our side in your pursuit to knowledge.



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