Cost Of Microcredit Set To Decline In Next Five Years | SupportBiz
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Cost Of Microcredit Set To Decline In Next Five Years

 
Indian microfinance industry is in the threshold of disruptive changes with the adoption of cutting edge information and communication technology
“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, Mumbai on May 4, 2016. The event was jointly organised by World Trade Centre Mumbai and All India Association of Industries (AIAI).
 
Murthy raised hope that the Indian microfinance industry is in the threshold of disruptive changes with the adoption of cutting edge information and communication technology. Soon, microfinance companies in India would graduate to the next stage where business is conducted without opening branches, which is witnessed in China, he added.
 
During the event, World Trade Centre Mumbai released a knowledge paper on ‘Impact of Microfinance in Financial Inclusion’.
 
Dr. Vidya Sravanthi, 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.
 
Meenal Patole, 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.
 
Earlier in his welcome address, Vijay Kalantri, Vice Chairman, World Trade Centre Mumbai remarked, “Patent protection and access to finance are related issues as companies that own patented products have greater ability to raise credit from financial institutions. The session would surely create awareness among MSMEs on the range of services offered by microfinance companies”.