Microfinance - Access to credit and insurance

Microfinance, the delivery of small unsecured loans to our Self Help Groups, is the core of our business model. Today, with operating costs of 3.5%, we are the most cost efficient microfinance lender worldwide. This distinction was recognized by Forbes in our earlier avatar as Microcredit Foundation of India. Given this, we lend at one of the lowest interest rates on the market (today between 18 and 21% on a diminishing balance compared to market rates of 25 to 40%) and are still among the most profitable microfinance institutions with repayment rates above 99%. Members entering our network are immediately eligible for a small loan of Rs. 5000 ($100) and, as they repay and establish credit history and ‘information’ credibility, become eligible for higher value loan products at lower rates. Many of our loan products come coupled with insurance. Our primary financial products include:

 

Pre-linkage Loan

This is a loan of a maximum of Rs. 5000 ($100) per member provided to a self help group within 30 days of formation that serves as a tester loan to gauge repayment capacity and establish credit history.

 

Activity Term Loan

This is a loan of initially Rs. 15,000 ($300) per member provided to a self help group largely for the purpose of income generating activities based on their repayment history for the prelinkage loan and their attendance and participation in meetings. This limit is increased with successive cycles up to Rs. 25,000 per member based on similar grading criteria.

Our branch offices are equipped for cash management and a custom mobile application for remittance allows careful tracking of repayments of individual borrowers within a group and delivery of receipts.