Survey 1: Is it Okay to Make Market Rate Profits in Microfinance?

Replies to This Discussion

Permalink Reply by Yangfan Gang on October 26, 2011 at 8:10pm

yes. In fact, demands are met by different suppliers. Not for profits, government, social enterprise and private companies meet different demands of people.

Permalink Reply by Effy Wang on November 2, 2011 at 3:00pm

No. It's important to realize that we are dealing with a special group of people. We'd attract more of them if we don't charge market rate to begin with. Reputation is more important when starting a business.

Permalink Reply by Susan Swyt on November 4, 2011 at 11:01am

I have little experience in microfinance but I wonder about the 50% rate that was noted so necessary this week's excel exercise. Vikram Akula, creator of SKS Microfinance notes in A Fistful of Rice that, "Local moneylenders charged exorbitant rates for their loans, usually 4% a month, but sometimes as much as 10%, which works out to 48 to 120%.  At such rates, anyone who fell behind on a payment could never expect to catch up -- even just a couple of months in, your interest burden would already be so high that you'd simply enter an endless debt spiral." (italics mine)  Is it OK to charge 50%, even if it is lower than the local moneylenders in this case?  Yes, microfinance does need to be sustainable, but I believe investment in tech and achieving efficiencies in service delivery can have a greater impact on budget.