Outstanding for MFIs to touch Rs 23,000 cr in FY10

Total loan outstanding of micro finance institutions are likely to be around Rs 23,000 crore by the end of March 2011, a 78 per cent rise over the corresponding period last year.

“The total number of beneficiaries will reach around 35 million which is 52 per cent higher than the previous year,” Mathew Titus ,executive director of, Sa-Dhan, said on the sidelines of unveiling the code of conduct for MFIs here.

‘Sa-Dhan’ is an umbrella organisation for MFIs in the country with 232 enrolled members by March-end, 2010. It oversees the functioning of these MFIs along with lobbying for enabling policy environment from the government.

Presently, MFIs are divided into three verticals — for profit MFIs, not for profit MFIs and self help groups and their federations.

Though MFIs have gained popularity among the poor in the recent past, higher interest rate charged by them have drawn flak from various industry watchers.

Referring to this issue, Titus said, “Due to the higher cost of funds and high debt servicing charges, the interest charged by MFIs is around 18 per cent to 30 per cent. We want to limit it to 18-24 per cent.”

He, also, said funding opportunities should be higher for MFIs to reduce the interest charges.

MFIs have generated a lot of interest among investors in recent past after the successful initial public offer of SKS Microfinance. Many MFIs are also planning to follow suit.

“Cheap funding from any source is welcome by us. However, the fund raised should be utilised for the designated purpose,” Titus said.

Titus also said, the code of conduct unveiled by Sa-Dhan would be reviewed by peer group for strict implementation.

On the proposed Micro Finance Bill, he said it was likely to come up in the next winter session.

Micro Finance Bill is waiting for the legislative nod from Parliament for last four years. The proposed bill seeks to regulate the micro-finance institutions, self help groups that are mostly unregulated in the country.

This bill will make the borrowing and lending easier for the MFIs with possibility of taking deposit from borrowers.