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News Summary: MFIs still struggling to get funds..!

Microfinance news summary (June 15- June 30)


According to the first edition of Microfinance Institutions Network (MFIN)’s quarterly report, MFIs located outside Andhra Pradesh (AP) has shown growth during 2011-12 with gross loan portfolios growing by 22% over the previous year. However, if AP is also included, the gross loan portfolios shows a decline of 15% compared to previous year. In AP alone, the portfolio decreased by 38% over the previous area.  


Despite improvement of private equity deals in Indian microfinance sector in 2011 (second highest volume of capital flows after Peru) and some large MFIs managing to raise funds,  small and medium sized MFIs are still struggling for funds as banks are still reluctant to fund MFIs, and to make it worse, banks have raised their lending rates from 9-12% to 15-18% now. It should be noted that according to RBI guidelines, the interest rate that MFIs charge cannot be more than 26% , with a margin cap of 12%.
  
On the other hand, the Union Government  has suggested that every business correspondent outlet should be converted into an ultra-small branch and agents should reach out to individuals on their own and operate from home, however, Reserve Bank of India does not seem to be too happy with this suggestion. RBI told banks to set up branch for 8-10 BCs operating in an area.

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