Getting refinance from institutions like NABARD and SIDBI is a “major challenge,” said R S Isabella, CMD, Repco Microfinance, at a conference on financial inclusion. Diwakar Hegde, Managing Director of NABFIMS, a subsidiary of NABARD, who shared the dais with Isabella, disagreed with her, noting that small institutions typically had governance issues and hence could find raising finance difficult. 

Addressing a panel discussion, ‘Contribution of microfinance in financial inclusion: Micro & Macro perspectives’ at the South India Conference on financial inclusion organised by the Sa-Dhan, a self-regulatory body for MFIs, Isabella complained that liquidity had become an issue with MFIs because development finance institutions had tightened lending norms. The panel discussion was moderated by Raghuvir Srinivasan, Editor, The Hindu businessline

Observing that SIDBI and other commercial banks, on which all MFIs depend for resources, also stipulate a nonperforming assets (NPA) ratio of five per cent while the industry average is above 10 per cent, Isabella called upon the development finance institutions to also look at the promoter group and the experience of the micro-lenders and not just take NPA ratios as a metric, while refinancing MFIs.  

Her co-panelist, Hegde, however, noted that fundraising was “purely a market game”, which depended on several factors. “Big players are still able to mobilise funds at cheaper rates but some small institutions have governance issues and are hence facing problems in resource raising.”  

He said MFIs should also look inwards and adopt technology so that they can improve their efficiency and reduce operational cost.   

Diversified borrowing 

Kalpanaa Sankar, MD, Belstar Microfinance, said MFIs need to diversify their borrowing sources by exploring market-linked debentures, non-convertible debentures, and external borrowings to have a good funding mix. She also added that the ultra-poor, farmers, and single women are often left out of the MFI due to high-interest cost which goes up to 24 per cent per annum. “If NABARD can give us loans at 8 per cent then we can lend it to the poor at 12 per cent.”  

In his remarks, BN Raveendrababu, MD, Asirvad Microfinance, said there is an abundance of funds available and investors are ready to invest in microfinance provided the institutions’ proper accounts, transparency in the system, and technology in place. “During the Covid-19 pandemic itself, so many people have raised capital,” he said.