Microfinance News Synopsis: Banks should charge less than 10% while lending to microfinance institutions

Microfinance Focus, July 8, 2010: Microfinance News Synopsis brings a compilation of industry headlines broadcasted by other news media from across the world.

Banks should charge less than 10% while lending to microfinance institutions: Vijay Mahajan, who in June took over as chairman of the Washington DC-based Consultative Group to Assist Poor (CGAP), wants banks in India to lend to microfinance institutions (MFIs) at sub-10% interest under the new base rate regime. Banks lend to MFIs at 11.5-14.5% interest, and these lenders charge rates as high as 30% for small loans to the poor. Mahajan, founder-chairman of microfinance firm BASIX group, however, said in a recent interview he expects rates charged by MFIs to go down on higher volumes and anticipated lower cost of funding.Mahajan, the first Indian to head CGAP, is also president of the Micro Finance Institutions Network (MFIN), a self-regulatory body comprising 39 MFIs [Livemint]

Filling in the ‘Missing Pieces’: How Mary Ellen Iskenderian and Women’s World Banking Are Redefining Microfinance. Mary Ellen Iskenderian remembers the moment when she discovered her purpose in life. As a child, her parents often took her to visit her father’s family in Turkey where she saw, for the first time, people living in utter poverty. She remembers thinking, “I don’t want to spend my life looking the other way.” She hasn’t. After graduating from Georgetown University and Yale with degrees in management and international finance, she worked for 17 years for Lehman Brothers and an affiliate of the World Bank — largely in Eastern Europe and the Soviet Union — linking newly freed entrepreneurs with sources of capital. In 2006, she became president and CEO of New York City-based Women’s World Banking (WWB), a global network of 40 microfinance institutions (MFIs) and banks in 28 developing countries [Knowledge Wharton]

‘It is not possible to decrease microfinance rates as of now’: The microfinance sector is set to move into the next level by creating a self-regulatory mechanism to check unethical business practices. The interest rates charged by microfinance institutions (MFIs), however, are likely to remain at an average of about 26% due to non-availability of cheaper funds and various other reasons, Vijay Mahajan, president of the Microfinance Institutions Network and chairman of Basix, tells DNA. There were some such incidents earlier. Now, we have come together under the Microfinance Institutions Network (MFIN), a self-regulatory body. We are forming a code for member institutions. About 80% of the microfinance market is under NBFCs, which are obviously for-profit companies. The balance is with NGOs, co-operatives, etc. All 39 members of the network are NBFCs [DNA]

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