SKS rules out reduction of interest rates

May 2007
Hyderabad, India, May, 10 2007 - SKS Microfinance Private Limited on Wednesday categorically ruled out reduction of interest rate on the loans it provides to rural poor, as suggested by Andhra Pradesh government.

"If you put a cap on the interest rate, as proposed by the government, the microfinance institutions will close down. As a result, the rural poor will be forced to go back to money-lenders," the founder and CEO of SKS Vikram Akula told reporters here.

Akula, a pioneer in microfinancing who was named by TIME magazine last year as one of the world's 100 most influential people, said that slashing interest rate would be unviable for the lending agencies.

SKS, rated as one of the fastest growing microfinance organisations in the world with a growth rate of 170 per cent, currently has over 6.50 lakh clients spread over 7,300 villages in 11 states.

Of this, Andhra Pradesh accounts for 2.75 lakh beneficiaries.

The company charges 24 per cent interest rate on its loans in AP and 28 per cent in other states.

"Ours is the lowest cost financing available to the poor," Akula said.

Started in 1998, SKS has so far disbursed Rs 772 crore loans to rural self-help groups.

The state government had recently suggested to the Microfinance Institutions (MFIs) to put a cap on the interest rate at 16 per cent.

Source : The India Times

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