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| There is no need for MFIs to look overseas for funds. We get loans for anything between 9 and 10.5 percent from commercial banks. An MFI can negotiate hard to get a loan at a maximum rate of 12.5-14 percent. Dr L H Manjunath Executive Director, SKDRDP |
Manjunath says, “For an amount in excess of Rs 50,000, however, we ask for some collateral security.”
Group enterprise loan is given for a rural enterprise and the responsibility for repayment is on the group as a whole. The loan amount can be anything from a couple of lakhs to Rs10 lakh as is the case with SKDRDP. According to the Bharat Microfinance Report 2008, the loan segment between Rs 5,000 and Rs 10,000 has seen the fastest growth in the country. The report attributes these to two factors—firstly, microfinance customers mature to bigger loans over the loan cycles, and secondly, urban microfinance starts with comparatively bigger loans than rural finance.
Reasons for higher rate
Though MFI officials acknowledge they have heard of usurious rates of 50-60 percent charged by some MFIs, none of them pointed out any such organizations. An analyst working with the Centre for Microfinance, which is a wing within the Chennai-based Institute for Financial Management and Research (IFMR), says she has never come across such high rates. She acknowledges rates are usually between 26-30 percent for most of the MFIs. However, according to a research paper she has produced, the clients of MFIs think about their loans not in terms of interest rates but only in terms of how much they actually owe on a weekly basis. Thus if a weekly installment for a loan of Rs 3000 comes to Rs 96, a client finds it acceptable without realizing she is paying a flat rate in excess of 50 percent (We found the numbers in a case study shown in the annual report of one of the MFIs).
One obvious reason for keeping interest rates as high as 24-32 percent is to cover for the administrative costs. MFIs keep high rates not because the loans are considered risky, as normal perception is. Rates are high because microfinance, as Samit Ghosh, CEO of Ujjivan, describes, is a ‘low margin high volume’ business. One person is required for processing any loan worth either a few thousand rupees or a few crores. For distributing a loan of Rs 1 crore in values of Rs 10,000 each, an MFI, for instance, will need 1000 persons, which will push up administrative costs. Contrast this to a commercial bank, where only one employee can distribute loans worth a few lakhs to several crore rupees. This explains why banks prefer more clients demanding bigger loans than a number of clients asking microcredit, despite default rate among large loan seekers being higher.
Manjunath, however, points out that many MFIs these days are seeking capital financing from venture capitalists like Silicon Valley, Sequoia Capital India, Sandstone Capital and others. They have to earn handsome profit on their investments in these institutions. They are, after all, bound to return to their investors at impressive rates. This compels MFIs to seek higher returns from their clients.
Another reason that is driving interest rates high can be seen in the way MFIs are paying fat salaries to the ‘professionals’ they employ. Manjunath says, “Poor people should be employed to work in rural areas. But MFIs are recruiting people from reputed management institutes. This drives overhead expenditures high.”
The Government of India has declared microfinance sector as a priority sector for lending, and banks are ready to provide finance to MFIs, as they themselves get refinanced through NABARD promptly.
Manjunath says, “There is no dearth of funds in India itself. There is no need to look overseas for loans. We get loans for anything between 9 and 10.5 percent from commercial banks. An MFI can negotiate hard to get a loan at a maximum rate of 12.5-14%.”
| MFIs: A comparison chart | |||
| Item | SKS Microfinance | Ujjivan | SKDRDP |
| Areas of operation | Rural areas | Urban areas and semi-urban areas in and around Bangalore | Rural areas in six districts in Karnataka |
| Legal status | Non-bank financial institution | Non-bank financial institution | Non-profit organization |
| Amount of microfinance (in Rs) | 12,000-16,000 | 8,000-30,000 | 10,000-10,00,000 |
| Purposes for loan | 1. Business loan | 1. Business loan | 1. Emergency reasons |
| 2. Emergency loan | 2. Family loan | 2. Income and livelihood reasons | |
| 3. Loan cover insurance | 3. Housing loan | 3. Housing | |
| 4. Emergency loan | 4. Group entrepreneurship | ||
| 5. Top up | 5. Insurance | ||
| 6. Insurance | |||
| Interest rate (diminishing) (in %) | 28.50 | 24-26 | 17-19 |
| Loan tenure (in weeks) | 50 50 -150 | 50-520 | |
| Gross Loan Portfolio (in Rs) (as on March 31st, 2008) | 261,718,932 | 9,110,145 | 85,164,592 |
Administrative cost, Manjunath says, should not be more than another 7 percent, but others like Ghosh and Anas say these costs come to around 10-11 percent. For Anas, an interest rate of 30-31 percent is acceptable, but SKDRDP makes profit by letting loans on anything between 12.5 to 18 percent. It is their discretion, after all, as to how much they would charge.
Mohammad Anas of SKS Microfinance says, “We have to make profits also. We make 3-3.5 percent profit by providing loans at 28.5 percent.”
Future
That the microfinance business is quite profitable is proved by the Bharat Micro Finance Report 2008, which shows it growing by 70 percent between March 2006 and 2008. More than 120 MFIs are already working in India. However, a large part of the population still has no access to microfinance, no matter what interest rate is. Making finance available to poor people at reasonable rates is highly desirable. MFIs should be encouraged to cut on their administrative costs. Better competition among MFIs can help achieve this. Some competition can be seen in the south Indian states, as Manjunath also acknowledges. But when it comes to other parts of the country, it is a one-sided story all the way. People have either no access to microfinance, or if they have, they have to accept credits at rates MFIs want.
When organizations like SKDRDP can lend at 17-19 percent and still manage profits, there is no reason why others can’t do the same. Probably banks should work more closely with MFIs and SHGs and devise methods to cater to more clients using bare minimum of their own human resources. This can be possible through effective use of modern day technologies and creating awareness for them among rural folks. Till this becomes possible, poor people will continue to ‘pay a price’ for trying to come out of poverty.
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written by Dr. Surendra Prasad Dimri, August 10, 2010
Greeting from Badrish Kirti Jan Kalyan Samiti,(BKJKS).
Badrish Kirti Jan Kalyan Samiti,(BKJKS) is a society registered as a non Governmental (not-for profiting making)organization under society registration act 21-1860.Foreign Contribution regulation act,1976, and section 12A &80 G of Indian Income Tax act 1961.Working in the remote and inaccessible areas in Uttarakhand, a province in Indian Himalayas, the area we work is remote and underdeveloped part of Uttarakhand. This is a state which itself has been historically neglected and marginalized within India.
Geography has determined the life condition of these villages in many important ways, Life in the mountains is difficult-to fetch water and collect firewood requires climbing up and down narrow trails over long distance. The challenge of the terrain has complicated the serving of the area.
Most families in the area where we work live off animal husbandry and farming their own small plots. This is sufficient for sustaining themselves only for eight and nine month of the year, during the rest of which they have to by their food. Apart from selling their small quantities of milk and vegetables on the market, about a four hour jeep drive way, there are very few opportunities to earn cash income. Since 1985 BKJKS has worked some of most disadvantaged people of society. It is education more then any thing else that help people take control of their own lives. Yet in India millions of children are unable to complete their schooling because of poverty of their situation, for this reason BKJKS sees education as the single most effective way to helping communities get out the poverty. Many school children from poor backgrounds in India drop out of education by the age of ten. Often their parents are illiterate themselves; their local school are very poor, or their parents need them to work to earn extra income for the family. Today, more then 150 million of Indian's population came from these extremely poor communities and the vast majority still lacks proper housing, medical care, education and employment prospects.BKJKS wants funds such as educational projects Residential Bridge Camp for the Schooling of Adolescent Disadvantaged Girls, drop out children for reschooling, and adult literacy classes in remote block of district Chamoli, so we can make improvement to thousands of peoples lives. In this regards BKJKS want financial support from your side. Expecting your help for this great humanitarian cause. Our hope is that BKJKS journey will useful for all whose aim to make development more impactful. We need your ideas, your presence, and your moral, physical and financial support in our work with mountain communities.
Looking forward for your kind consideration. I eagerly await your reply.
Thanking you and warm regards.
Your's Sincerely
Dr.Surendra Prasad Dimri
Secretary/ chief-executive
Badrish Kirti Jan Kalyan Samiti,(BKJKS)
Tripathi Bhawan, Near Rishi Ganga, Indira Market, Gopeshwar, Distt-Chamoli-246401, Uttarakhand, India. Email: This e-mail address is being protected from spambots. You need JavaScript enabled to view it Ph +91-09412082143.
written by mohd yameen ali, June 28, 2010
written by Madavi L K, March 15, 2010
“MULNIVASI MUKTI MANCH ” [English name -- “ Indigenous People Liberation Forum”] is a non profitable, Indigenous / Tribal people’s NGO registered under Society Act bearing Regd. No.273/2001 is working for poor tribal people of India. We have no financial source from other side. We are spending money from our own pockets for the organization on the principle of “Pay back to Society”. This NGO is the tribal / indigenous people’s NGO, for the tribal people by the tribal people. The tribal people are heritage of the Harappa Culture, originally inhabitant of the land of India. The tribal people have not defined in Constitution, not recognized as Indigenous people, no separate law on the basis of customary and culturally identification. We are ADIVASI literary indigenous people but, in the Indian constitution have not recognized us as Adivasi, and enlisted our races as scheduled tribes without any parameters and universal definition in constitution of India.
Our Aims and Objects
1] Awake the tribal people on their human rights,
2] Increase the education in primitive tribal women where is the below 10%
literacy,
3] To introduce the cultural education and prevent from mis-education amongst Tribal people.
4] Education for children, street children, child boursrs, bonded child labor, poor
Tribal children from the families living below poverty lines.
5] Health problems of tribal people, those who are living in remote tribal areas,
below poverty lines, naxel effected areas, areas of malnutrition and starvation
amongst tribal children.
6] Welfare of children, child workers, female children and poor tribal people.
7] Running the training centers, nursing centers, girl’s hostels, schools, collages,
health care centers, cultural institutes, education institutes etc.
8] Protection and prevention from sexual exploitation of minor girls, students in
Ashram schools, women in working places.
9] Prevent from trafficking of tribal children, women.
10] Prevent from dying the tribal children due to malnutrition and starvation.
11] Awaking amongst the un-married mothers those who are giving the birth new
Babies without their father.
12] Prevent from killing tribal by the tribal people on the name of naxelite struggles.
13] Settlement of widows of naxelite tribal people and police.
14] Resettlement of tribal families who displaced due to projects, dams, mines.
15] Establish the cultural identity; codify the customs and customary law.
Our Achievements
1] Arranges the seminars, workshops, conferences on the indigenous issues and problems in tribal districts of Maharashtra State,
2] Training programs on education for students, teacher education, nursing trainings,
3] Arranges the campus for employees, officers, social workers, on the above objects,
4] Efforts taken for provide the employment to students, poor people living below poverty lines,
5] Make the competent the tribal people to evolve in decision making process,
6] To make the try to bring the tribal people in Nation Development Flow.
7] Awake the tribal people on their human rights
8] Taken the issues of definition, cultural identity, customary law for tribal people
before competent authorities,
9] Represented in international conference of UNO in Durban [ South Africa ] on the subject of Racial Discrimination in 2000 and sub-commission of Human Rights in 2001 in Geneva [ Switzerland ] and placed the issues of our NGO
10] Implemented the project no. 101[3] approved by the High Commission of Human Rights of United Nation, and celebrated the world’s decade of ‘‘International Indigenous People’’ in India during the year 2005.
We are specifically focusing on the children of tribal / primitive tribal people residing in remote tribal areas and isolated from urban areas…..
1] Bonded labor, minor labor, ,
2] Female labor’s exploitation on the working spots,
3] Transportation of labors from one state to another.
4] Education in tribal children where is 10% below education i.e. in primitive tribes
5] Education for youth those who are out of school,
6] Reduce to illiteracy in tribal belt
7] Tribal girls education.
8] Resettlement of naxelite widows and children those who are died in conflicts.
9] Resettlement of un-married mother’s children,
10] To prevent the Tribal youth from unconstitutional movements i.e. naxelite,
11] Culture education for tribal youth
12] Prevent from miss-education
13] Sexual exploitation of girls in school in government hostels.
14] Prevent from prostitution of minor girls which resulted to un-married mother problems,
15] Vocational education for tribal girls,
16] Prevent from killing the tribal to tribal youth on name of naxelite.
Prayer:-
We need of supports for poor tribal children, women, and we also requested to consider us for seminars, conferences, meetings, trainings, on the trial / indigenous issues as well as grants, financial assistance for projects etc...
Yours sincerely,
Madavi L. K.
President
Mulnivasi Mukti Manch
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esteemed customers. Whatever your loan needs are, large or small, personal
or mortgage, We are ready to talk with you about how we can meet your needs.
We offer both long and short termed loans as low as 3% interest rate and
this loan offer is strictly for honest people who are God fearing and are
ready to repay the loan within the agreed period and will not run away with
our money. If you are interested in getting a loan, all you need to do is
contact us via e-mail at; This e-mail address is being protected from spambots. You need JavaScript enabled to view it