Indian microfinance institutions (MFIs) are offering loan products with monthly repayment plans as opposed to weekly payment terms, and according to a recent article more Indian microfinance institutions are considering offering products with monthly payment terms [1]. Indian microfinance institutions Spandana Sphoorthy Financial Limited, Bharatiya Samruddhi Finance Limited, Trident Microfinance and Janalakshmi are among those MFIs offering loan products that accept monthly repayment.
The benefit of the monthly repayment model is that it could better match the cash flows of certain customers, who generate monthly income or find it more convenient to pay monthly. Using a monthly plan, MFIs may be able to keep the client base intact for a longer time as customers’ needs are met thus they are less likely to seek the services of a different microfinance institution or be subject to loan poachers. Another benefit of the monthly repayment model is that MFIs’ administrative costs of collection are reduced.
However, with the monthly repayment model the MFIs are exposed to a larger loan size and term, thereby potentially increasing the credit risk of the loans. Also, due to the payment structure of the monthly model, the effective interest rate is generally lower for loans on a monthly schedule.
By Jennifer Shevock, Research Associate
About Spandana Sphoorty Financial Limited:
Spandana Sphoorty Financial Limited provides microcredit and credit-plus services to low-income households in India. The Company was founded by Padmaja Reddy in 1998 and receives its funding from development financial institutions and banks. Spandana Sphoorty reported total assets of INR 26.8 billion (USD 580 million) as of March 31, 2010.
About Bharatiya Samruddhi Finance Limited (BSFL):
Bhartiya Samruddhi Finance Limited (BSFL) is a regulated non-banking finance company based in Hyderabad, India, that was founded in 1997. It is part of the BASIX Group, which provides financial services, agricultural/business development services and institutional development services to rural poor households and organizations that serve them. As of March 31, 2009, BSFL had a gross loan portfolio of USD 73.6 million, total assets of USD 111 million, return on assets of 1.8 percent, return on equity of 15.6 percent and 499,000 active clients.
About Trident Microfin Private Limited:
Trident Microfin Private Limited (formerly Annapurna Financial Services Private Limited) is a microfinance institution established in 2007 and headquartered at Hyderabad in Andhra Pradesh, India. The goal of the company is to provide financial and business solutions to low-income individuals and enterprises.
About Janalakshmi Financial Services (JFS):
Janalakshmi Financial Services (JFS) is a microfinance institution located in India. It is focused primarily on urban customers and offers loans, savings and microinsurance products. As of March 8, 2010, it operates in six cities, has over 100,000 customers and a gross loan portfolio of INR 850 million, the equivalent of over USD 18.6 million.
Sources and Additional Resources:
[1] “MFIs find part-shift to monthly repayments an advantage” August 29, 2010. http://www.business-standard.com/india/storypage.php?autono=406196
MICROCAPITAL BRIEF: “Indian Microfinance Institution Spandana Sphoorty’s Board Actively Evaluating an Initial Public Offering (IPO)” August 5, 2010. https://www.microcapital.org/microcapital-brief-indian-microfinance-institution-spandana-sphoorty%e2%80%99s-board-actively-evaluating-an-initial-public-offering-ipo/
MICROCAPITAL BRIEF: “Promoters of Indian Microfinance Institution (MFI), Bharatiya Samruddhi Finance Limited (BSFL), Buy Back Seven Percent Stake from ICICI Bank, International Finance Corporation (IFC) and Shorecap International Limited” July 20, 2010. https://www.microcapital.org/microcapital-brief-promoters-of-indian-microfinance-institution-mfi-bharatiya-samruddhi-finance-limited-bsfl-buyback-seven-percent-stake-from-icici-bank-international-finance-corporation-ifc/
MICROCAPITAL BRIEF: “Janalakshmi Financial Services (JFS), a Microfinance Institution (MFI) Located in India, Raises $10m from Funders Including Tree Line Asia Master Fund (Singapore) Private Limited and Bellwether Microfinance Fund” March 9, 2010. https://www.microcapital.org/microcapital-brief-janalakshmi-financial-services-jfs-a-microfinance-institution-mfi-located-in-india-raises-10m-from-funders-including-tree-line-asia-master-fund-singapore-private-limited-a/#more-4533
MicroCapital Universe: Spandana Sphoorty: https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Spandana+Sphoorty+Financial+Ltd
MicroCapital Universe: Bharatiya Samruddhi Finance Limited (BSFL): https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Bhartiya+Samruddhi+Finance+Ltd+(BSFL)
MicroCapital Universe: Trident Microfin Private Limited: https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Trident+Microfin+Private+Limited
MicroCapital Universe: Janalakshmi Financial Services (JFS): https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Janalakshmi+Financial+Services+%28JFS%29
Browse the MicroCapital Universe and add your entry to the wiki at: https://www.microcapital.org/microfinanceuniverse/
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