NEWS & ADVICE : CAR LOANS
Uneven distribution of MFIs hampers the flow of micro finance
By Vaibhav Aggarwal
Apr 2, 2009
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The credit flow to the deprived lot of the country has yet not increased despite of the several measures taken by the government and the main reason for this is the uneven spread of micro-financial institutions (MFIs) along with high interest rates that not coming down in a proper manner.

The Chief General Manager of Rural Planning and Credit Department of RBI, B.P. Vijayendra said, "There is an uneven spread of the micro-finance movement."

"Not all States have the same number of micro-finance institutions and moreover interest rates still remain high," he added.

Micro-finance is a facility where by poor and low income group people living in rural, semi-urban and urban areas can get access to financial services. In India this service is extended by primarily through the self-help groups (SHGs).

The interest rates for micro-finance have been significantly high in the range of 25%-30% even tough the credit is extended to the low income group people.

The Joint Secretary in the finance ministry's banking and insurance department, Amitabh Verma said: "Banks or other financial institutions have not been able to bring down interest rates and this is a cause for worry. We need to see how we can resolve this issue."

There was a national micro-finance conference organized by Sa-Dhan, an organisation representing micro-finance institutions where this view was kept forward. The panelist of the conference said the micro-finance or micro-credit in the country has not been equally distributed.

SHGs that are responsible to disburse credit to this band of population are mainly located in the southern India that enjoy majority of the credit disbursement.

 


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