SKS Microfinance, a publicly traded microfinance institution (MFI) based in India, recently announced that it will lower interest rates to for new borrowers borrowers in the state of Andhra Pradesh from 26.69 percent to 24.55 percent.
A spokesman for SKS Microfinance declined to comment on whether the MFI is planning to expand the program to other states in India. Other MFIs are also slashing interest rates, says Alok Prasad, CEO of Microfinance Institutions Network (MFIN), a network of 39 microfinance institutions (MFIs) in India, “most of [our] members are moving towards offering the same interest rate. Every institution, however, needs to assess its ability to do so”.
SKS Microfinance’s move came amidst a period of instability in the Indian microfinance industry. Legislators have proposed that MFIs be further regulated [2] after concerns about coercive MFI behavior [3] and some have called for a cap on high interest rates [4] charged by some MFIs.
The Indian MFIs reporting data for 2009 to the Microfinance Information Exchange (MIX), the microfinance information clearinghouse, have an aggregate loan portfolio of USD 4.6 billion, total assets of USD 5.1 billion and 26.4 million active borrowers.
About SKS Microfinancce:
SKS Microfinance is an Indian microlender that delivers microfinance products through a group lending model to impoverished women in India. It is a for-profit non-banking finance company which converted to a public limited company in May 2009 and launched an initial public offering on July 28, 2010. Equity investors include Quantum Hedge Fund, Sequoia Capital, Vinod Khosla, Small Industries Development Bank of India, Bajaj Allianz, Yatish Trading, Kismet Capital, Sandstone Capital, Silicon Valley Bank and Unitus. As of March 31, 2010, SKS Microfinance Private Limited reports to the Microfinance Information Exchange (MIX), the microfinance information clearinghouse, total assets of USD 897 million, a gross loan portfolio of USD 653 million, a return on assets of 4.96 percent, a return on equity of 21.56 percent and 5.79 million active borrowers.
About Microfinance Institutions Network (MFIN):
The Microfinance Institutions Network (MFIN) is a trade association of Indian microfinance lenders. MFIN is presided by Vijay Mahajan, who is also the Chairman of Hyderabad-based BASIX. MFIN consists of 39 NBFC-MFIs in India, which account for more than 80% of the Indian market. MFIN is supported by Omidyar Network, a philanthropic investment firm, and the International Finance Corporation (IFC), a member of the World Bank Group. Omidyar Network funds MFIN in support of its efforts.
By Trevor Kwong, Research Assistant
Sources and Additional Resources:
[1] Source Article: Indian Economic Times: SKS cuts rates in Andhra for new borrowers
[2] MICROCAPITAL BRIEF: Indian Government Ponders Role of NABARD in New Microfinance Regulatory Framework:
[3] MICROCAPITAL BRIEF: Series of Suicides Related to Microloan Repayment Rock India, Raises Questions of Whether Interest Rates Charged by Microfinance Institutions (MFIs) are Too High:
[4] MICROCAPITAL BRIEF: India’s Finance Ministry Asks Banks to Ensure That Microfinance Institutions (MFIs) to Which They Lend Cap Lending Rates at 24%:
[5] Microfinance Information Exchange: India:
http://www.mixmarket.org/mfi/country/India
[6] MicroCapital Universe: SKS Microfinance:
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=SKS+Microfinance
[7] MICROCAPITAL BRIEF: Indian Microfinance Institutions (MFIs) in Andhra Pradesh Offer Debt Restructuring:
Browse the MicroCapital Universe and add your entry to the wiki at https://www.microcapital.org/microfinanceuniverse/tiki-index.php
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