Marking a new phase in the evolution of the microfinance market in India, Bandhan (an MFI headquartered in West Bengal) reduced its interest rate to an unprecedented 19%. This is one of the rare, if not only, instance of an MFI reducing interest rates voluntarily and without the spectre of political duress. We think this is a fantastic and highly overdue move – because it will focus competition finally on the dimension that really matters – price. We showed here that even with effective interest rates between 16 – 18% , ROEs of 20% plus are possible for investors.
(Note: Chandra Shekhar Ghosh is the Managing director of Bandhan.)
3 Responses
Could not agree more with you. Always a puzzle for me that MFIs compete on all the dimensions except the important ones of depth of outreach and price. I want to add my own words of appreciation to the move by Mr. Ghosh of Bandhan.
wow..this is superb..this will be the beginning of a new chapter in the MFI industry .
kudos to Bandhan !!
Pathbreaking move; will usher in equally unprecedented spike in volumes plus, more importantly, innovation at grass roots. Takes a lot of courage to reduce the rate (spread?) so drastically but clearly this is leadership in action! Good luck Bandhan.
PS: and aah…what I'd do to see your revised financial model 🙂