Microfinance loan rates to be published online
The interest rates charged on microfinance loans given to the rural and urban poor in India will soon be available online.
The decision by the newly-formed Microfinance Institutions Network (MFIN), a self-regulatory body, comes after criticism of the excessive rates charged by some microfinance providers.
Microfinance institutions (MFIs) in India charge interest rates upward of 24%, significantly more than the rates on loans from regular banking channels.
This has led to accusations that MFIs are profiting from poverty.
“To bring in more transparency, it has been decided to present interest rates charged by all microfinance institutions by product, by region, online,” said Vijay Mahajan, MFIN president.
“The rates would be converted into annual percentage returns to avoid confusion,” he added.
“This will make the interest rates fully transparent.”
MFIN decided to publish rates online rather than to set a ceiling on interest rates.
The group also blamed the high rates charged by MFIs on stringent regulatory norms, and said compared to rates charged by loan sharks – 150% or higher – their rates seem reasonable.