Micro-finance productive even at 40%: Study

 The loan recovery rate on IRDP loans vary between 10% and 55%. In contrast, leading MFIs in India enjoy nearly 100% repayment rates. Also in IRDP scheme, there is widespread credit diversion and low levels of awareness of repayment conditions.

According to the agency, attempts by governments to regulate this industry by capping the rate of interest in various countries have resulted in denial of access and withdrawal of players from offering these products and
services thus forcing these very poor people to return to money lenders. There is no evidence of it actually having reduced the effective cost of financing for small borrowers.

The best way for governments and donors to lower interest rates without making microcredit unsustainable is to promote competition and innovation, both of which improve efficiency and lower prices, it says.