Sa-Dhan members to cut interest rate

Last Updated: Thu, Oct 21, 2010 19:20 hrs

Sa-Dhan, an association for the microfinance sector, which has a membership of 260 organisations, said that its members had agreed to reduce the interest rates. It, however, did not specify by how much the rates would be reduced.

Following "adverse media" reports about the coercive methods being adopted by the microfinance institutions (MFIs) for recovery of loans and the issue of an ordinance by the state government regulating MFI activities, Sa-Dhan held a meeting of its members here on Thursday. The meeting, presided by Sa-Dhan chairperson Jayshree Vyas, was attended by the representatives of 50 MFIs.

According to Sa-Dhan executive director Mathew Titus, the meeting deliberated the issues related to interest rates, media reports, high cost of borrowings from banks and cooperating with the state government to promote good practices by MFIs.

The members wanted the banks to reduce the rate of interest, which was currently in the range of 11-12 per cent. "The interest rates will further be reduced by MFIs if the government passes on the subsidy to MFIs that lend to SHGs (self-help groups)," Titus said.

With the microfinance sector growing fast, new challenges were cropping up that necessitated Sa-Dhan to introduce a voluntary code of conduct for the MFIs. "The code, which was recognised by the RBI (Reserve Bank of India), is being implemented by Sa-Dhan," he said.

Titus, however, admitted that Sa-Dhan was not that successful in ensuring compliance of MFIs with the code. "Lack of resources is coming in the way of implementation of the code," he said.

Disclosing the proceedings at the meeting, Titus said that the members expressed concern that the "present negative campaign due to some incidents in some places which are not due to microfinance loans" would affect the small businesses and livelihood activities of 6 million "poor borrowers".

But Sa-Dhan could not specify which of the reports pertaining to the incidents of suicide were false. So far, it had not probed any incident of suicide reportedly committed by MFI borrowers in the state.