Vivek,
Recently talked to a friend from the fastest growing MFcompany, currently spreading its operations in Gujarat and also got small bank license.
I asked same question about negligible NPAs on books. Reasons for low NPA could be –
- With money, MFIs also lend knowledge and give guidance, especially in rural areas.
- In urban areas, MFIs do check consistency and prospects of business and borrower.
- Constant vigilance
- Relative short repayment cycles that can improve financial discipline
- Desire for getting higher amount loan from next cycle does play a role in some cases.
- Under penetration that limits multiple borrowings and increases trust bound dependency of borrower.
Another interesting read
http://www.livemint.com/Opinion/vKWsSxGepyqdNP4hNTrw7H/Indian-microfinance-institutions-have-just-busted-a-myth.html
Discl : Invested
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