Microfinance rates may see big fall

The microfinance industry has formed an umbrella organisation, called Microfinance Institutions Network (MFIN), that will lead to lower costs of operations and a significant drop in interest rates at which the unbanked poor get loans.

Currently, microfinance institutions provide loans at 24-26%.
“We are working on a dozen projects — mobile telephony for repayment of loans, servers, MIS — because of which the human-intensive part will come down and costs of operations for us will reduce,” said Vijay Mahajan, president, MFIN, and chairman, Basix.

“Costs will come down dramatically and it is our intent to pass on the benefit to our customer. We are in the budgeting month and you will see it (reduction in costs and passing them to the customers) in our operations in the next six months,” Mahajan said.

The 35 players that come under the MFIN include SKS Microfinance, L&T Finance, Bandhan Financial Services, Bhartiya Samruddhi Finance, Equitas Micro Finance, Fullerton India, Janalakshmi Financial Services.

MFIN has formed a special purpose vehicle, called Alpha Micro Finance Consultants, that has invested Rs 2 crore in credit information company, High Mark.

MFIN will work with Cibil and High Mark to check for multiple borrowing and the credit record of the customer. These credit information companies will get access to the entire borrowing history of these 20 million customers under the net of these RBI-regulated NBFC microfinance entities.

Suresh Gurumani, chief executive officer at SKS Microfinance, said, “The bureau is the step where we can get a tip off if the same borrowers are borrowing too much.”