India: MFIs agree to reduce interest rate to 24 p.c.

Oct 2010
Hyderabad, India, October, 24 2010 - While directing the district collectors to be tough on erring Micro Finance Institutions, the state government on Saturday told the MFIs to recover the payments once a month from the present weekly collection from rural borrowers.

Collectors and district officials have been told to convey the same to the MFIs when they come for registration, rural development minister Vatti Vasant Kumar told the media.

The minister said that chief minister K Rosaiah interacted with the collectors and instructed them to strictly implement the recently-issued ordinance and ensure that no MFIs harass the rural poor.

In a related development, CEOs of five MFIs called on rural development secretary Reddy Subramanyam and B Rajasekhar, CEO of Society for Elimination of Rural Poverty (SERP), and assured the state of their full cooperation in meeting the rural credit needs with mutual understanding.

As part of their overtures, the MFIs have expressed their willingness to work closely with the state government to try and set things right in the microfinance sector.

A slew of measures have been proposed including reduction in interest rates to around 24 per cent by April 2011, loan restructuring for distressed and overburdened borrowers as well as lending to SHG Federations at nearly 8-9 per cent lower interest rates than what they are offering borrowers.

The MFI delegation comprised MFIN president and Basix founder Vijay Mahajan along with top guns of leading MFIs like Vikram Akula of SKS Microfinance, Padmaja Reddy of Spandana Sphoorthy, Udaia Kumar of Share Microfinance, Trident Microfinance CEO Puli Kishore and L&T Microfinances Kishore Mangal Vedhe.

Plans are afoot to shortly set up a joint working group of 7-8 people comprising members of MFIs as well as the state government to try and work towards a constructive, collaborative process of setting things right in the microfinance sector, said Mahajan of MFIN, which is a self-regulatory body of 44 NBFC MFIs.

The joint committee will be headed by Society for Elimination of Rural Poverty (SERP) additional CEO Raghunandan Rao on the government side with Trident Microfinance CEO and MFIN AP chapter head Puli Kishore representing MFIs on the group. Results are expected on various fronts by the end of November.

Foremost among the proposals mooted by MFIN is rationalisation of the credit distribution system, Mahajan said.


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