In a recent interview featured on LiveMint, an Indian business newspaper owned by the Wall Street Journal, Mr Vijay Mahajan, President of the Microfinance Institutions Network (MFIN), a network of 39 microfinance institutions (MFIs) in India, argued that “banks should charge less than 10 percent while lending to MFIs.”

According to Mr Mahajan, banks currently charge 11.5 to 14.5 percent, making it difficult for MFIs to lower the interest rates they charge to borrowers, which he reckons now averages 26 percent.

Mr Mahajan added that he expects the interest rates charged by MFIs to decrease as the cost of borrowing from banks decreases, the volume of customers increases and as more efficient use of technology helps bring down operational costs.

By Stefanie Rubin, Research Associate

About the Microfinance Institutions Network (MFIN):

The Microfinance Institutions Network (MFIN) is a self-regulatory organization comprised of 39 of India’s microfinance institutions (MFIs). Mr Vijay Mahajan, Chairman of MFIN, is also the Chairman of CGAP (Consultative Group to Assist the Poor) and the Chairman of the BASIX Group, an Indian microfinance institution established in 1996. BASIX Group consists of several companies that provide savings and insurance services to poor households in rural India as well as agricultural/business development services and institutional development services.

Additional Resources:

Source Article: Livemint.com: “Banks Should Charge Less than 10% While Lending to Microfinance Institutions” http://www.livemint.com/2010/07/07222548/Banks-should-charge-less-than.html?atype=tp

MicroCapital Universe: Microfinance Institutions Network (MFIN): http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Microfinance+Institutions+Network+(MFIN)

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