Grameen ex­tends guar­an­tee for MFIs to en­sure bank fi­nance

The Pak Banker - - Company & Boss News -

DHAKA: Grameen Foun­da­tion, a not-for-profit or­ga­ni­za­tion based in the US, and two of its af­fil­i­ates have set up an $8 mil­lion (Rs.36.2 crore) fund to of­fer guar­an­tees on be­half of mi­cro­fi­nance in­sti­tu­tions (MFIs) look­ing for bank fund­ing. The ob­jec­tive is to in­stil con­fi­dence in In­dian banks to lend to MFIs.

Banks have stopped fund­ing MFIs, par­tic­u­larly those that are op­er­at­ing in Andhra Pradesh, as their col­lec­tion rate has dropped dra­mat­i­cally fol­low­ing an or­di­nance passed by the state govern­ment in Oc­to­ber. The or­di­nance has now be­come a law with the govern­ment pass­ing it early last week. This pro­hibits MFIs from charg­ing in­ter­est that ex­ceeds re­pay­ment of prin­ci­pal and re­sort­ing to co­er­cive loan re­cov­ery prac­tices.

"The group will make avail­able $8 mil­lion in guar­an­tee funds that it ex­pects to gen­er­ate a min­i­mum of $16 mil­lion in lo­cal-cur­rency fi­nanc­ing to poverty-fo­cused MFIs from lo­cal banks," said a state­ment is­sued by Grameen Foun­da­tion, along with its af­fil­i­ates Grameen Cap­i­tal In­dia and Grameen-Jameel Mi­cro­fi­nance Ltd on Mon­day.

How­ever, both bankers and some mi­cro credit len­ders expressed doubt whether banks would ac­cept such col­lat­eral to lend to MFIs.

"We need to see what is the ef­fi­cacy of this guar­an­tee and whether we are al­lowed to lend against this. This may help in giv­ing com­fort to MFIs," said M. Naren­dra, chair­man and man­ag­ing di­rec­tor of In­dian Over­seas Bank. "At the moment, our fo­cus is to di­rectly lend more to self-help groups, which op­er­ate in com­pli­ance with the rules. Even for MFIs, if they come with gen­uine pro­pos­als and do not opt for ag­gres­sive meth­ods for loan re­cov­ery, banks will look into their pro­posal." - PB News

IS­LAM­ABAD: Dr. Ab­dul Hafeez Sheikh, Fed­eral Min­is­ter for Fi­nance chair­ing the bid farewell cer­e­mony to Ashraf M. Hayat, Sec­re­tary Plan­ning. -App

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.