Cost of Microcredit will decline soon | PSN Murthy, AGM, MUDRA

Mumbai, May 9: “The Past models of microfinance companies were all brick and mortar based on branches and self-help groups. The future could be disruptive with past success being no guarantee of future survival. Interest rate (for microcredit) is expected to fall to 15% in the next five years from the current level of over 20%,” remarked PSN Murthy, Assistant General Manager, Micro Units Development and Refinance Agency Ltd (MUDRA) while delivering keynote address at the event on ‘First in Series of ‘Make in India’ on Microfinance: A Game Changer for Financial Inclusion’ at World Trade Centre Complex, recently. The event was jointly organised by World Trade Centre Mumbai and All India Association of Industries (AIAI).

During the event, World Trade Centre Mumbai released a knowledge paper on ‘Impact of Microfinance in Financial Inclusion’.

Dr. VidyaSravanthi, Managing Director, Asmitha Microfin Ltd agreed that increasing technology adoption would reduce the operational cost of microfinance companies and thereby enable them to cut lending rates. She also raised hope that the microfinance would be a great social movement to eradicate poverty in rural areas.

Sankar Chakraborti, CEO, SMERA Ratings Ltd remarked that the major challenge faced by the industry is high cost of distribution of loans as most of the microcredit borrowers are located in remote villages. However, there is scope for reduction in the cost because of digital banking,Chakraborti opined.

MeenalPatole, CEO & Managing Director, Agora Microfinance India Ltd pointed out that the biggest challenge for microfinance lenders is the availability of long term financial support from commercial banks and development finance institutions. “Financial institutions must offer long term financial support to microcredit companies as microfinance is a long gestation business which take years to generate profits,” Patole highlighted.

 In order to create a greater impact on the society, Patole suggested that large financial institutions like SIDBI must work together with microfinance companies by creating district level forums.