Ujjivan Financial Services, a microfinance institution (MFI) based in India, recently decreased the interest rates it charges on loans to poor borrowers by one to two percentage points. The effective interest rate for new group loans is now 25 percent per year, down from 26 percent. The rate for loans to previous group and individual customers is now 24 percent per year, reduced from 26 percent. The rate for first-time loans to individuals was not disclosed.
According to Samit Ghosh, managing director of Ujjivan, the MFI has “undertaken a number of measures to improve the efficiency of operations to reduce costs and take advantage of the economies of scale based on our 300-branch nationwide presence. This has resulted in higher levels of profitability for the organization. In accordance with the directions of the Reserve Bank [of India], the benefits are being shared with our customers by reducing the interest rates.”
As of June 30, 2012, Ujjivan reported to the US-based nonprofit Microfinance Information Exchange (MIX) total assets of USD 146 million, a gross loan portfolio of USD 126 million, return on assets (ROA) of 0.24 percent, return on equity (ROE) of 1.06 percent and 855,000 active borrowers.
By Charlotte Newman, Research Associate
About Ujjivan Financial Services
Ujjivan Financial Services is a microfinance institution (MFI) based in Bangalore, India, that offers loans and insurance products. It was founded in 2004 and focuses on serving low-income women in urban and semi-urban areas. Its products include business loans, educational loans, emergency loans and life insurance. As of June 30, 2012, Ujjivan reported to the US-based nonprofit Microfinance Information Exchange (MIX) total assets of USD 146 million, a gross loan portfolio of USD 126 million, return on assets of 0.24 percent, return on equity of 1.06 percent and 855,000 active borrowers.
About the Reserve Bank of India
Established in 1935, the Reserve Bank of India (RBI) undertakes consolidated supervision of the financial sector comprising commercial banks, financial institutions and non-banking finance companies (NFBCs). The current focus of RBI is to supervise financial institutions, consolidate accounting standards, resolve legal issues in cases of banking fraud, monitor non-performing assets and supervise the rating model for the banking sector. In 1979, the National Bank for Agriculture and Rural Development (NABARD) was formed at the behest of RBI to provide regulatory oversight to regional rural banks (RRBs) and to promote the development of agricultural lenders: tasks that had been the responsibility of RBI. While non-banking financial companies such as for-profit microfinance institutions operate under RBI regulations, the responsibility for inspecting agricultural lenders, RRBs, state cooperative banks, district central cooperative banks and state cooperative agricultural and rural development banks was transferred to NABARD. RBI maintains these responsibilities for for-profit MFIs. Although RBI was originally the parent organization of NABARD and until October 2010 held a 72.5 percent stake in the outfit, RBI owns a one-percent stake in NABARD as of 2011.
Sources and Additional Resources:
Ujjivan Press Release: “Ujjivan Improves Efficiency, Reduces Interest Rates,” http://www.ujjivan.com/content/ujjivan-improves-efficiency-reduces-interest-rates
MicroCapital.org story, November 5, 2012, “MICROCAPITAL BRIEF: Lack of Law and Order Causes Microfinance Institution (MFI) Ujjivan of India to Put Lending Operations on Hold in Parts of Bihar,” http://www.microcapital.org/microcapital-brief-lack-of-law-and-order-causes-microfinance-institution-mfi-ujjivan-of-india-to-pull-out-of-state-of-bihar/
MicroCapital.org story, October 1, 2012, “MICROCAPITAL BRIEF: India’s Ujjivan Raises $9m in Equity from International Finance Corporation (IFC), Netherlands Development Finance Company (FMO),” http://www.microcapital.org/microcapital-brief-indias-ujjivan-raises-9m-in-equity-from-international-finance-corporation-ifc-netherlands-development-finance-company-fmo/
MicroCapital Universe Profile: Ujivan Financial Services
MicroCapital Universe Profile: Reserve Bank of India
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