MFIs seek time till 2015 to cut margin cap
Microfinance institutions in the country function on an average operational cost ranging between 12% and 14%. While the MFIs have gradually brought down operational costs by 50% in last two years, the apex bank feels costs can be brought down further, especially for those with a portfolio size of more than R100 crore. Total loan portfolio of 41 MFIs as on June, 2012 was pegged at R17,154 crore. Members and representatives of microfinance institutions met RBI deputy governor Anand Sinha a fortnight ago.
The apex bank has brought down margin cap for microfinance institutions with a portfolio over R100 crore to 10% from 12% earlier, while keeping the margin cap for institutions with lower than R100 crore portfolio at 12%. As on June 2012, there were 21 MFIs in the country with a portfolio size of more than R100 crore.
Operational cost for the MFIs consists of three main factors — personal cost, administrative cost and provisioning cost. Personal cost contributes to around two thirds of the operational cost while administrative cost and provisioning costs constitute the rest.
“We need time at least till 2015 if we have to bring it down finally,” said Chandrashekhar Ghosh, founder and mentor of Bandhan. “Operational cost can be brought down if loan size is increased. But with
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