Microfinance News Digest

Vijay Mahajan warns Indian Microfinance Sector could collapse

Vijay Mahajan, president of the Microfinance Institutions Network, which represents 44 of India’s leading microfinance lenders, said commercial bank loans to the sector were drying up and borrowers were refusing to pay.

“We are facing collapse,” Mahajan, a pioneer of lending to the poor in India who also heads the microfinance institution BASIX, told AFP. “Unless something changes on the ground, the industry as we know it is basically gone,” he said. Read the rest on AFP

vijay mahajan indian microfinance

Vijay Mahajan. Image-credit:cgap.org

Banks choke flow of funds to Indian Microfinance Sector

In a fresh blow to microfinance institutions (MFIs), banks are refusing to lend them even a sanctioned line of credit, following recent controversies over opaque corporate governance and usurious interest rates. The ensuing liquidity crisis has prompted many MFIs to seek a moratorium on loan repayment to banks.

MFIs raise 75-80 per cent of their funds via bank borrowings, 15 per cent from equity and another 10 per cent from other sources like cash securities. Interest rates charged by MFIs vary between 18 per cent and 32 per cent, bankers said.

Asit Pal, executive director at Corporation Bank, confirmed: “We are not sanctioning fresh loans to MFIs, and the line of credit is also on hold.” Read the rest on Business Standard

Loan crusader

Filmmaker Usha Rajeshwari has gone the Manthan way, making a Tamil feature film that tells the story of a small town woman’s tryst with microfinance

Sundari, living in a small village in Tamil Nadu, has a chance to get a loan and start a business. But what does she want to do — set up a petty shop in the village selling shampoo and toothpaste, start an idli stall, or make old-fashioned string purses to sell in the city, where they are a rage? One would not think much of such an issue, sitting comfortably in an Internet-equipped air-conditioned office space. But in the context of an ever-expanding global economy, women like Sundari are grappling with questions that don’t have easy or ready answers. Read the rest on the Hindu

Can Mobile Payments Deliver Financial Inclusion As Well As Returns ?

By Kartik Desai , Lok Capital

Mobile phone enabled payment services for the poor can help expand financial inclusion going beyond micro-credit.

When I asked Laxman Singh, a migrant from UP living in a low-income neighbourhood in Mumbai, on why he was reluctant to open a zero-balance bank account and not deal with the various risks associated with holding cash, he told me that he had no need for it because he has no savings and he does not like to visit the bank branch. For centuries his forefathers have also lived hand-to-mouth.They haven’t needed to or been able to open a bank account. Read the rest on VC-Circle

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