Microfinance News Digest

Rohini Nilekani comments on Microfinance Crisis in India

Rohini Nilekani , the chairperson of Arghyam, and Pratham Books has written an article on the Microfinance Crisis in Andhra Pradesh, India. The article which appeared in the Times of India is given below.

Microfinance, Macro Trends

By Rohini Nilekani

The macro crisis in the microfinance sector may not get resolved anytime soon. But it is a symptom of a much larger trend moving through the country.

Rohini Nilekani Infosys Arghyam

Rohini Nilekani. Image-credit:arghyam.org

The Indian microfinance model developed differently from that in its original home in Bangladesh. It took root with self-help groups (SHGs) set up in Karnataka by Myrada, with NABARD’s support, back in the early 1980s. These affinity groups created a social glue among poor women which allowed them not only to offer their mutual guarantee as collateral against their borrowings, but enabled them to work collectively for other causes in their communities. There are hundreds of documented stories of how the SHG movement has generated social change and political empowerment, in addition to accessing more finance for the poor than ever before in independent India.

Read the rest on Times of India

Form consortium for MFI lending, RBI tells banks

“In keeping with bankers suggestions, RBI has asked banks to form a consortium to lend to MFIs,” said a senior State Bank of India (SBI) official, adding that it was decided that bankers would monitor the portfolio and jointly take a decision on release of additional funding to MFIs. SBI has an exposure of about Rs 853crore to the MFI sector.

Bandhan Financial Services (Bandhan), SKS Microfinance and ShareMicrofin are the major borrowers of State Bank of India. Read the rest on MSN News

The business of microfinance

By C P Chandrashekar

With an ordinance issued by the government of the state of Andhra Pradesh being replaced by legislation, the era of regulation of microfinance institutions (MFIs) has arrived. The law among other things seeks to cap interest rates and regulate the functioning of the MFIs because of evidence that the credit provision strategies, the interest rates and the collection practices of these institutions trap the poor into debt and makes it so difficult for some to escape that they even resort to suicide.

Read the rest on the Hindu .

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