MFI sector demonstrates maturity by reducing rates- MFIN

KOLKATA Kolkata: Microfinance Industry Network (MFIN), the self-regulatory organisation of the micro-credit sector, on Friday said entities operating in the sector have demonstrated maturity and many of them have reduced interest rates in the last few months.Interest rates have been reduced by up to 150 basis points, it said, adding that this reduction has been done at a time when the cost of funds for the entities remains high.MFIN said microfinance entities have been able to pass on efficiency gains to their clients, which has been possible due to adoption of better technology and diversified sources of funding.Review of portfolios and interest rates by microlenders is a continuous process, the organisation said, adding that the sector is committed to passing on benefits to clients. The self-regulatory organisation said that assessing the borrower’s household income is important as it will ensure that the borrower does not overburden himself and is able to honour his repayments on time. MFIN members also identified several safeguards, such as limiting the number of microfinance lenders for a borrower to a maximum of four and capping the total loan to Rs 2 lakh. Alok Mishra, CEO and director of MFIN, said these voluntary steps go beyond RBI regulations and industry codes of conduct and demonstrate the sector’s commitment to responsible lending practices.