The Indian government began review of a draft 2011-2012 budget, which reportedly includes a partnership with the Small Industries Development Bank of India (SIDBI), a government-owned bank providing credit to microfinance institutions, to allocate funds totaling approximately INR 100 crore (USD 22 million) to traditionally underserved groups via a newly established India Microfinance Equity Fund.
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MICROCAPITAL BRIEF: ACCION International Issues Credit Guarantees Totaling $1.5m to Indian Microfinance Institutions (MFIs) Swadhaar FinServe, Saija
ACCION International (ACCION), a private, US-based nonprofit organization with a global network of microfinance institutions (MFIs), recently issued two standby letters of credit (SBLC) totaling USD 1.5 million for two of its Indian partner microfinance institutions (MFIs) to secure loan facilities.
MICROCAPITAL BRIEF: Microfinance Information Exchange (MIX) Updates Review of Yunus’s Classification of Interest Rates, Argues Against Interest Rate Caps
The US-based nonprofit data provider Microfinance Information Exchange (MIX) recently published an updated review of the methodology for categorizing microcredit interest rates proposed by Nobel laureate Dr Muhammad Yunus in his book “Creating a World Without Poverty”. The review, which uses 2009 data from approximately 1,020 microfinance institutions (MFIs) covering approximately 88 million borrowers, updates the findings of the previous review presented by MIX that uses 2008 data.
MICROCAPITAL BRIEF: Federal Microfinance Bill May Replace Existing State Microfinance Legislation in India
The Ministry of Finance in India recently unveiled its plan to pass a new microfinance bill to regulate the microfinance sector. The ordinance passed by the government of the Indian state of Andhra Pradesh in October 2010, in response to a series of farmer suicides, severely curtailed lending activity in the region. The bill, which is reportedly being drafted along the lines of the recommendations made by the Reserve Bank of India’s Malegam Committee which was formed in the wake of the unrest in Andhra Pradesh, is likely to render state legislation on microfinance null and void.
MICROCAPITAL EVENT: C5 Hosts Sixth Annual Microfinance Investment Summit, Geneva, Switzerland, July 5 – 8, 2011
Event Name: Sixth Annual Microfinance Investment Summit
Event Date: July 5 – July 8, 2011
Event Location: Geneva, Switzerland
MICROCAPITAL BRIEF: Vijay Mahajan of Indian Microfinance Institution (MFI) BASIX Undertakes 75-Day Journey Across 12 Indian States to Gain Feedback From Poor People
Vijay Mahajan, chairman of Indian for-profit microfinance institution (MFI) BASIX, began a 75-day journey in January 2011 on foot, public transport and car across 12 Indian states to obtain direct feedback from poor people on the effect of microfinance on their lives. Mr Mahajan began his journey amidst criticism that BASIX charges unreasonably high interest rates.
MICROCAPITAL BRIEF: International Association of Microfinance Investors (IAMFI) Releases Report “Charting the Course: Best Practices and Tools for Voluntary Debt Restructuring in Microfinance”
The International Association of Microfinance Investors (IAMFI), a US-based NGO, recently released a report, “Charting the Course: Best Practices and Tools for Voluntary Debt Restructuring in Microfinance”, that aims to develop guidelines for debt restructuring for microfinance institutions (MFIs).
MICROCAPITAL BRIEF: Vikram Akula of SKS Microfinance Views Recommendations of Reserve Bank of India (RBI) Malegam Committee as Boost to Microfinance
Vikram Akula, chairman of SKS Microfinance, a for-profit microfinance institution (MFI) in India, has stated that the recommendations released by the “Malegam Committee” of the Reserve Bank of India (RBI) in response to unrest in microfinance in the Indian state of Andhra Pradesh, would give a boost to the microfinance sector by further encouraging bank lending to MFIs. Mr Akula also stated that the proposed microloan interest rate cap of 24 percent would not impact SKS Microfinance as its lending rate falls below the cap, but that it would impact smaller institutions that are yet to achieve efficiencies of scale. He viewed this recommendation as a measure to encourage consolidation within the sector.
MICROFINANCE PAPER WRAP-UP: Microfinance Banana Skins 2011, the CSFI Survey of Microfinance Risk, by David Lascelles and Sam Mendelson, Published by Centre for the Study of Financial Innovation (CSFI)
By David Lascelles and Sam Mendelson, published by the Centre for the Study of Financial Innovation, February 2011, 48 pages, available at: http://www.cgap.org/gm/document-1.9.49643/Microfinance_Banana_Skins_2011.pdf
MICROCAPITAL BRIEF: Malegam Committee Report on Microfinance Regulation in India Fails to Meet Expectations, Argues Sriram
On the website “livemint.com”, an Indian partner of the US-based Wall Street Journal, independent researcher MS Sriram presented his evaluation of the recommendations issued in response to the crisis in the microfinance sector in Andhra Pradesh by the Malegam Committee of the Reserve Bank of India (RBI). While he argues that the report has some positive aspects, he states that it largely fails to deliver.
MICROCAPITAL BRIEF: ACCION’s Centre for Financial Inclusion Offers Lessons Learned from Nicaraguan Microfinance Crunch, Reiterates Six-Point Agenda For “Recalibration” of Industry Worldwide
The Centre for Financial Inclusion, a division of US-based nonprofit ACCION International, recently released an overview of lessons that can be taken from the Nicaraguan microfinance downturn. Triggered by a combination of the global economic downturn and the “No Pago” (No Payment) Movement, which was encouraged by the Nicaraguan government, the result was a reduction in the aggregate microloan portfolio from USD 420 million in 2008 to USD 170 million in 2011, a fall in the number of clients served from 324,000 to 225,000 and estimated portfolio at risk rising to 19 percent [1].
MICROCAPITAL BRIEF: SKS Microfinance of India Increases Loan Loss Provision, Reports 38% Fall in Quarterly Net Profit
SKS Microfinance, a for-profit, publicly traded microfinance institution (MFI) based in India, recently reported total income of INR 3.85 billion (USD 83.8 million) and a 38 percent drop in net profit to INR 341 million (USD 7.4 million) for the period October-December 2010. A 30-percent fall in the share price of SKS has also been recorded since October 2010 [1].
MICROCAPITAL BRIEF: Equitas Microfinance of India to Reduce Loan Portfolio to $187m by March 2011
Equitas Microfinance, a microfinance institution (MFI) that was established in Chennai, India, in 2007, recently announced plans to reduce its loan portfolio from INR 9.5 billion (USD 210 million) to INR 8.5 billion (USD 187 million) by its fiscal yearend of March 2011.
MICROCAPITAL BRIEF: Reserve Bank of India (RBI) Relaxes Rules in Effort to Ease Microfinance Institution (MFI) Liquidity Crunch
The Reserve Bank of India (RBI), India’s central banking authority, has temporarily relaxed asset classification rules for bank loans to the microfinance sector, allowing commercial banks to classify loans made to microfinance institutions (MFIs) as standard assets. Under the standard guidelines, banks had to classify loans made to MFIs as unsecured assets, which required a higher minimum provision than do standard assets [1].
MICROCAPITAL BRIEF: Indian Rating Agencies, ICRA and Credit Rating and Information Services of India Limited (CRISIL), Predict Microfinance Institution (MFI) Consolidation Would Result From Reserve Bank of India (RBI) Proposals
According to Indian rating agencies Credit Rating and Information Services of India Limited (CRISIL) and ICRA Limited (formerly Investment Information and Credit Rating Agency of India), a recent proposal by the Reserve Bank of India (RBI), India’s central banking authority, to regulate the country’s microfinance industry will result in slower growth and smaller profits for microfinance institutions (MFIs) that will lead to a consolidation in the sector.
MICROCAPITAL BRIEF: International Finance Corporation (IFC) Invests $35m in Equity of Indian Microfinance Institution (MFI) Bandhan Financial Services
The International Finance Corporation (IFC), the investment arm of the World Bank Group, a multilateral development finance organization based in Washington DC, will make an INR 1.6 billion (USD 35.1 million) equity investment in Bandhan Financial Services, a microfinance institution (MFI) based in Kolkata, India, to expand its operations in the country. The deal is reportedly the largest equity investment in an Indian MFI since the turmoil in the microfinance industry in Andhra Pradesh began in late 2010.
MICROCAPITAL BRIEF: Reserve Bank of India (RBI) Subcommittee Proposes Regulation for Microfinance Institutions (MFI)
A committee headed by Y H Malegam, central board director of the Reserve Bank of India (RBI), India’s central banking authority, met last week and proposed that microfinance institutions (MFIs) should be allowed to charge a maximum interest rate of 24 percent to borrowers and that loans to a single microborrower should not exceed INR 25,000 (USD 548).
MICROCAPITAL BRIEF: Microfinance Under Scrutiny – Arguments For and Against From the Daily Star of Bangladesh and Forbes Magazine
Since the onset of the debt crisis in the Indian state of Andhra Pradesh during the last quarter of 2010, in which borrowers stopped making payments on their loans to microfinance institutions (MFIs), microfinance has come under intense scrutiny.