In some districts of Karnataka State (India) there has been resistance to repay loans taken from MFIs (also refer to the WSJ article on repayment problems in that state). In Kolar the Muslim clergy have given the call, pronouncing the MFI loans as un-Islamic; in Mysore a ten day curfew that followed a communal clash created repayment problems, in Tumkur another local group asked the MFIs to pay some kind of protection money to carry on their business resulting in repayment disturbances The size of the affected portfolio is estimated to be between $12 and 15 million. For the large MFIs, the problem is very small, while some small MFIs have a large problem. The MFIs are confident that the problems will be resolved and that they would recover most of the loans. The affected portfolio is tiny: less than 0.5% of overall outstanding loans. So we shouldn’t think of this in terms of the sub-prime crisis. Nonetheless we should draw lessons from those events.

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We have had quite a bit of electronic chatter on interest rates. There seems to be no middle line: some say “cost does not matter, but access does” and others swear that they will not practice usury.

I have been party to many discussions and have always ended up on the side of the borrower. If microfinance is about prioritizing the poor, then pricing should consider their context. Sustainability of the poor should matter more than anything else.

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Is financial inclusion a business proposition or Corporate Social responsibility ? More than 1.68 million “No frills accounts” have been opened by banks in India in response to an initiative of the Reserve Bank of India. Impressive numbers. But the plans are limited. They concentrate more on opening the accounts than on what should follow (pdf). A study revealed that 28% of the new no frills accounts (pdf) had amounts saved in them and only about 15% had seen some transactions after the initial credit. Read the rest of this page »

For those familiar with the Indian microfinance scene the slower growth rates of SHG linkage (only 18% compared to 40%+ in the previous year) should be a good opportunity to think.  Is the slowdown (State of the Sector Report – Microfinance India 2008) just a pause or a stop? I wonder where the enthusiasm of the past years has gone.  Neither NGOs, nor donors or the policy establishment seem to be pushing the SHG model with same vigor as in the past years.  Read the rest of this page »