MFI lending Platform

I was reading a good article on livemint.com called “Big Microfinance Firms Taking Over Clients of Smaller Players,” and in itsksmicrofinance.jpg Vikram Akula, the founder and CEO of SKS Microfinance, discusses how smaller MFIs are having a hard time getting funding, so SKS is helping out a lot of their recipients:

“Banks are lending only to large MFIs. We are in a strong position. We are holding discussions with MFIs who are facing strain and helping them by taking over their clients,”

Since there are so many small MFIs out there who are having trouble finding funding, why do MFIs run out of people to loan to?  It has happened multiple times that I have gone to microfinance lending platforms and have not been able to loan money.  If these small MFIs in India are having trouble getting money for their recipients, why don’t they reach out to these organizations?  The article also mentions that there is a demand for 55 billion dollars while India currently only provides about 5 billion in microfinance loans.  If the people are out there, wouldn’t it just be a matter of connecting them to the right organizations?  It seems like there are plenty of lenders ready to donate to individual recipients, but not so many who are willing to donate to MFIs. What if there was a microfinance lending platform that was similar to Kiva and Microplace, but instead of donating money to individual recipients, you could donate to different MFIs?  Lenders could give loans to MFIs, who would in turn give loans to entrepreneurs.  The loans would have to be for a longer term than normal since they would most likely be bigger loans.  The model could be either non-profit or provide a return, depending on the business model, and it could help smaller MFIs who are having a harder time coping with the current economic crisis.  Of course there would be pros and cons to lending platform, but I think that if they were weighed out, the pros would win.

Learn more microfinance lending platforms.

About Jerry Ostradicky

I work in Advertising Operations at Zillow, but LOVE microfinance. I'm always interested in startups, especially non-profits, reach out to me if you're working on anything cool!
  • I think there is more happening in the Indian microfinance sector than what is covered in the livemint article.
    1. Banks have reduced their lending in general across the board because of the global economic crisis. Microfinance is also affected because of the credit squeeze.
    2. One of the large Indian banks which was lending to smaller MFIs last year has reduced its lending to smaller MFIs, compounding the first problem.
    3. There are other banks which want to lend to smaller MFIs. But since many of these are NGOs or NGOs in the process of transforming to for profit NBFC(Non banking finance companies) and relatively under-capitalized, banks do not lend to them. A guarantee will increase lending to these MFIs but there are not many organizations offering guarantees.

    Bhalchander

  • Thanks Bhalchander for the extra information. I do agree that the livemint article didn’t cover the entire story, so I made the post hoping to get further information.
    Who is the large bank that you are referring to in your second comments?

    Jerry