MICROCAPITAL BRIEF: Microfinance Institutions Network (MFIN) of India Advises Members to Reduce Interest Rates

The Microfinance Institutions Network (MFIN), a trade organization composed of 47 Indian microlenders, has advised its members to reduce their interest rates voluntarily by “at least 25 basis points” [1] by the end of September 2015. The advice is based on a regulation amended in 2014 by the Reserve Bank of India, the central banking authority of the country, that mandates microfinance institutions (MFIs) to lend at a rate no higher than the cost of funds plus a 10 percent margin for MFIs with a credit portfolio of more than INR 1 billion (approximately USD 15 million) and cost of funds plus a margin of 12 percent for smaller MFIs[1].

Manoj Kumar Nambiar, the president of MFIN, said that “by September, we expect most of the MFIs to reduce interest rates. The rate cut has been due to twin factors of fall in cost of funds and operational efficiency. Also, as MFIs grow, they are getting more credit trustworthy and are being also upgraded by rating agencies. This apart, economies of scale has helped reduce the cost of operations, which has led to an overall reduction in interest rates”[1].

MFIN, whose members are organized as non-banking finance companies has been recognized by the Reserve Bank of India as a self-regulatory organization.


By Victor Mugo, Research Associate


About Microfinance Institutions Network (MFIN)

The Microfinance Institutions Network (MFIN) is a trade association of 47 Indian microlenders that operate as non-banking finance companies. MFIN has received support from the Omidyar Network, a US-based philanthropic investment firm, and the International Finance Corporation (IFC), the private investment arm of the US-based World Bank Group. MFIN has been recognized by the Reserve Bank of India (RBI) as a self-regulatory organization since 2014.


Sources and additional resources

[1] Business Standard: MFI industry on an interest rate cut spree


[2] MicroCapital Universe Profile: Microfinance Institutions Network (MFIN)


Do you know that MicroCapital publishes the MicroCapital Monitor newspaper each month? Find out more at https://www.microcapital.org/products-page/

Similar Posts: