MFI sector demonstrated maturity by lowering rates: MFIN

Kolkata, Aug 2 (PTI) Microfinance Industry Network (MFIN), the self-regulatory organisation of the micro-credit sector, on Friday said that the entities operating in this space have demonstrated maturity with several of them lowering interest rates in the last few months.

The reduction in interest rates has been up to 150 basis points, it said, adding that this downward revision had been done when the cost of funds remained elevated for the entities.

MFIN said the microfinance units had been able to pass on efficiency gains to their customers, which had been made possible by the adoption of better technology and diversifying sources of funding.

Review of the portfolio and interest rates by microlenders is an ongoing process, the organisation said, adding that the sector is committed to passing on the gains to the customers.

The self-regulatory organisation said assessment of a borrower’s household income is important as this will ensure that a borrower does not overstretch herself and is able to honour her repayments on time.

MFIN members also identified several guardrails like restricting the number of microfinance lenders to a borrower to a maximum of four and limiting the total indebtedness to Rs 2 lakh.

MFIN CEO and director Alok Misra said these voluntary steps are over and above RBI regulations and the industry code of conduct and display the sector’s commitment to responsible lending practices.