Microfinance News Digest

Swaminathan Aiyer defends Microfinance Lending Rates

The noted journalist Swaminathan Ankaleshwar Aiyar who is an angel investor in many MFI’s has appealed to the RBI and Finance Ministry to avoid a cap on Microfinance Interest Rates – The article follows below

Don’t cap microfinance lending rates

Should lending rates of microfinance institutions (MFIs) — often 28-36 % — be capped? Some folk think so. Officials in Andhra Pradesh once closed down MFIs for usury, but the RBI came to the rescue, declaring there could be no cap on lending rates. Banning MFIs would only drive poor people into more expensive loans from moneylenders. MFIs have provided finance to 20 million poor people, whom nationalised banks could not reach. The RBI itself has promoted microcredit by classifying bank loans to MFIs as priority sector loans.

swaminathan microfinance

Swaminatha A Aiyar - Image-credit:guardian.co.uk

But now capping has again come to the fore. The finance ministry has apparently told banks to ensure that MFIs to whom they lend cap their lending rates at 22-24 %. This directly contradicts the RBI policy… Read the rest on Economic Times

Microfinance Institutions cautious on IPO plans

Large microfinance institutions (MFIs) with an equity base of over Rs 500 crore that had lined up plans to raise fresh capital, including through the IPO route, are at the moment treading with caution.

This is in response to the unfolding developments in the MFI sector in Andhra Pradesh, triggered by suicides among rural borrowers allegedly due to default in repayment, subsequent bringing out of an ordinance by the State Government to check the functioning of MFIs and the ongoing legal battle on the ordinance. Read the rest on Money Control

Microfinance to get a regulator in NABARD

A worried government has put on fast track the proposed bill to regulate micro-lenders, as it seeks to ensure that over-regulation by states does not kill the sector that is envisaged to play a big role in furthering financial inclusion.

The finance ministry could move a bill in the winter session of Parliament that will make Nabard responsible for regulation of all non-profit microfinance institutions structured as trusts, cooperatives, or mutual benefit societies. Read the rest on Economic Times

Choppy ride ahead for India’s micro lenders

It was not business as usual for microfinance lenders collecting loans on Monday in India’s Andhra Pradesh state. As many as half were stopped by police and officials despite being allowed to make collections after a ten-day hiatus imposed by a state ordinance. Read the rest on the Financial Times

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