According to Indian rating agencies Credit Rating and Information Services of India Limited (CRISIL) and ICRA Limited (formerly Investment Information and Credit Rating Agency of India), a recent proposal by the Reserve Bank of India (RBI), India’s central banking authority, to regulate the country’s microfinance industry will result in slower growth and smaller profits for microfinance institutions (MFIs) that will lead to a consolidation in the sector.
Category: Regulation
MICROCAPITAL BRIEF: International Finance Corporation (IFC) Invests $35m in Equity of Indian Microfinance Institution (MFI) Bandhan Financial Services
The International Finance Corporation (IFC), the investment arm of the World Bank Group, a multilateral development finance organization based in Washington DC, will make an INR 1.6 billion (USD 35.1 million) equity investment in Bandhan Financial Services, a microfinance institution (MFI) based in Kolkata, India, to expand its operations in the country. The deal is reportedly the largest equity investment in an Indian MFI since the turmoil in the microfinance industry in Andhra Pradesh began in late 2010.
MICROCAPITAL BRIEF: Reserve Bank of India (RBI) Subcommittee Proposes Regulation for Microfinance Institutions (MFI)
A committee headed by Y H Malegam, central board director of the Reserve Bank of India (RBI), India’s central banking authority, met last week and proposed that microfinance institutions (MFIs) should be allowed to charge a maximum interest rate of 24 percent to borrowers and that loans to a single microborrower should not exceed INR 25,000 (USD 548).
MICROCAPITAL BRIEF: Retail Microfinance Institution (MFI) Loans Taking Two Months to Process in Andhra Pradesh, India
Since the state government of Andhra Pradesh implemented a law in October 2010 that requires microfinance institutions (MFIs) to get approval from district officials before disbursing loans, it now reportedly takes approximately two months to process loans.
MICROCAPITAL BRIEF: Nigeria Deposit Insurance Corporation (NDIC) Begins to Repay Customers of Failed Microfinance Banks
In 2010, the Central Bank of Nigeria (CBN) revoked the operating licenses of 224 microfinance banks (MFBs) in the country that were “terminally distressed and technically insolvent.” After receiving fresh tranches of capital, new operating licenses were given to 121 of those outfits, but the remaining 103 institutions are being liquidated by the Nigeria Deposit Insurance Corporation (NDIC) and their depositors are now being repaid in stages.
MICROCAPITAL BRIEF: Small Enterprise Education and Promotion (SEEP) Network Releases “Pocket Guide to the Microfinance Financial Reporting Standards: Measuring Financial Performance of Microfinance Institutions”
The Small Enterprise Education and Promotion (SEEP) Network recently released new financial performance reporting standards for microfinance institutions (MFIs) that are intended to help microfinance stakeholders evaluate MFI performance based on a universal set of criteria.
MICROCAPITAL BRIEF: Kenyan Microfinance Start-Up Remu DTM Limited Acquires Deposit-Taking License
The Central Bank of Kenya (CBK), Kenya’s central banking authority, has granted a license to start-up microfinance institution (MFI) Remu DTM Limited (Remu). The Microfinance Act of 2008 allows the CBK to license, regulate and supervise DTMs—institutions that provide loans to micro- or small enterprises and low-income households, and that receive money by way of deposits. Previously, MFIs could issue loans but were not allowed to take money from the public.
MICROCAPITAL BRIEF: Pakistani Microinsurance Providers Unveil Draft Regulation to Help Growth of Industry
A round table of microinsurance experts organized by the Securities and Exchange Commission of Pakistan (SECP) and the US-based Center for International Private Enterprise (CIPE) came together recently to address issues, such as frequent claims against existing microinsurance plans and high administrative costs, that are preventing the expansion of microinsurance in Pakistan.
MICROCAPITAL BRIEF: SKS Microfinance Announces Interest Rate Slash in India
SKS Microfinance, a for-profit microfinance institution (MFI) in India, has announced a universal cut in “effective” interest rates charged to microfinance borrowers from 26.7 percent to 24.6 percent.
MICROCAPITAL BRIEF: Microfinance Regulation in Sri Lanka to be Consolidated
Microfinance institutions (MFIs) and other organizations offering microfinance products in Sri Lanka – which reportedly number in the thousands – are to be regulated under a new microfinance bill to be introduced to the Sri Lankan parliament soon.
MICROCAPITAL BRIEF: Founder of Grameen Bank and Nobel Peace Prize Winner Dr Muhammad Yunus Speaks Out Against the Commercialization of Microfinance Institutions (MFIs)
Dr Muhammad Yunus, founder of Grameen Bank and winner of the Nobel Peace Prize for his work in microcredit, has again spoken out against the commercialization of microfinance institutions (MFIs) and their deviation from the mission of poverty alleviation.
MICROCAPITAL BRIEF: Indian Government Launches Life Insurance for Self-Help Groups (SHGs)
The Indian government has introduced a life insurance scheme for members of self-help groups (SHGs), village-based groups of about 10 to 20 women that offer savings and loans to their members, in an effort reassure bankers who invest in SHGs.
MICROCAPITAL BRIEF: Japan, Asian Development Bank (ADB) Aim to Help Mongolia Strengthen Financial Regulations, Improve Financial Education for Poor through Television Drama
A USD 2.5 million grant from Japan’s Fund for Poverty Reduction, which is financed by the Japanese government and administered by Asian Development Bank (ADB), will be used to attempt to strengthen the regulation of Mongolia’s savings and credit cooperative market.
MICROCAPITAL EVENT: Farz Foundation Hosts First National Islamic Microfinance Conference 2011, Lahore, Pakistan, January 29, 2011
Event Name: First National Islamic Microfinance Conference 2011
Event Date: January 29, 2011
Event Location: The Lahore Chamber of Commerce & Industry, Lahore, Pakistan
MICROCAPITAL BRIEF: Government of Nigerian State of Ondo and Bank of Industry (BOI) Disburse $13m to Microfinance Scheme
The government of the Nigerian state of Ondo disbursed NGN 2 billion (approximately USD 13 million) to create the Micro, Small and Medium Enterprises Development Fund, which will provide wholesale funding and refinancing liquidity for microfinance institutions (MFIs).
MICROFINANCE BRIEF: Bangladesh Government to Investigate Allegations of “Financial Irregularities” Against Microfinance Institution (MFI) Grameen Bank
The Bangladesh government recently announced that it will form a committee to investigate allegations of “financial irregularities” against Grameen Bank, a microfinance institution (MFI) started in Bangladesh by Dr Muhammad Yunus.
MICROCAPITAL BRIEF: Microfinance Experts Say “Microcredit Is Not The Enemy”
The Financial Times, a UK-based newspaper, recently published an opinion piece titled “Microcredit is not the enemy,” which examines the recent microfinance trouble in the Indian state of Andhra Pradesh and some of the misperceptions that have subsequently emerged that deem the industry as “a flawed idea.”
MICROCAPITAL BRIEF: Local Government in Indian State of Andhra Pradesh Considers Additional Microfinance Regulation, Requires Disclosure of Operational Procedures
The government of the Indian state of Andhra Pradesh, where the microfinance industry has been described as experiencing a crisis, is reportedly considering new legislation to refine an ordinance that was passed in October 2010 in response to a series of suicides said to be linked to debt collector harassment.