tag:blogger.com,1999:blog-7182576430045656062.post6183545897199282393..comments2024-02-25T13:47:07.003+05:30Comments on Candid Unheard Voice of Indian Microfinance: Effective Interest Rates and Other Practices in Indian Micro-Finance: It Is About Time That RBI Conducted A Nationwide StudyRamesh S Arunachalamhttp://www.blogger.com/profile/09264606020720529040noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-7182576430045656062.post-52941618867107931562011-04-29T17:56:34.180+05:302011-04-29T17:56:34.180+05:30hi Ramesh, the process we follow for submitting da...hi Ramesh, the process we follow for submitting data to mft is foll:<br /><br />1. we provide details of our vairous loan products including the 'current' lending rate, various charges, security deposit if any etc to mft<br />2. along with this, we also give the number of clients who are covered by each of the above products<br />3. along with this we also send scanned copies and courier physical copies of pass books of a few sample clients who have availed the above different type of loans, for MFT to verify our information with the copy of passbook of the clients<br />4. post this, MFT calculates the APR (annual principle rate) which is the equivalent of our IRR i.e the reducing balance interest rate and commuicates the same to us with the calculations. <br />5. we verify the calculation and if it looks correct we confirm back to mft and post this they publish it on their website<br />6. if we make any changes in our lending rates for any of the products, then we are required to inform MFT immediately (within atleast 30 days) and follow the same process as above to get the new rate published on the website of mft.<br /><br />the question can be asked, what happens if an MFI increases their lending rate but fails to inform mft. it would of course mean a violaiton of the agreement we sign with MFT where we commit to inform rate changes immediately. also all the mfis who operate in the market know each others' rates thro MFT site and if any of us find other MFIs offering higher rates but nto reflecting in mft website, we would naturally raise it with mft who wouldl then take it up with the mfi concerned and correct the data<br /><br />thus it works on each m fi being truthful in submission of data on timely basis to mft as well as the competitive spirit amongst mfis acting as a check against mal practices of any mfi.<br /><br />as u know there are no statutory requirement as on date for publishing true lending rates and this mft represents the best possible process as on date. someday if there comes into existence a statutory body with statutory powers replacing mft then natureally it would shift to them from that time onwards<br />regards/vasuvasudevanpnhttp://www.equitas.innoreply@blogger.comtag:blogger.com,1999:blog-7182576430045656062.post-13704023627938609292011-04-29T09:29:51.071+05:302011-04-29T09:29:51.071+05:30Dear Vasu
As a follow-up to my comments above, I...Dear Vasu <br /><br />As a follow-up to my comments above, I have a request. Can you share for everyone's benefit, the process that you as equitas followed for providing data to MFT. That would in fact, clarify much of the issues and serve to educate people like me better<br /><br />Look forward to learning from you about the process. Apart from my comments above to Chuck where I request this, I have also sent him two mails specifically requesting this information but am yet to hear from him. In the meantime, it would be good to hear from you, as a supplier of information to MFT about the process and I am sure that Chuck will send me the MFT version as well. This should help all of us understand the process better and I am sure that many of my own apprehensions may be removed when I get to understand the process better<br /><br />Thanks and look forward to hearing from you<br /><br />Warm regards<br /><br />RameshRamesh S Arunachalamhttps://www.blogger.com/profile/09264606020720529040noreply@blogger.comtag:blogger.com,1999:blog-7182576430045656062.post-57923790964614618532011-04-28T21:18:00.049+05:302011-04-28T21:18:00.049+05:30Dear Vasu
As usual, thanks for your comments and...Dear Vasu <br /><br />As usual, thanks for your comments and appreciate what you have said. Let me correct your factual misrepresentations – I have never said MFT data is incorrect. I would urge you to re-look at my post. On the contrary I have appreciated them for their efforts. I hope you stand corrected on that.<br /><br />My basic points were: <br /><br />There is a lot of data to contrary that I have found from field as far as interest rates are concerned and apart from my own observations, field data from AP (APMAS study with original excel sheet) done in the later half of 2010 clearly show higher interest rates on the ground and in variance with what has been published at the MFT website. <br /><br />Now, you say that MFT data is applicable to current loans and I am not sure what that means? You also mentioned on the telephone that the current loans would be loans disbursed from Feb 2011 but this would not apply to past loans being repaid in the same period – meaning that all loans disbursed before Feb 2011 would have higher interest rates. <br /><br />I would like to tell you that, I have higher interest rate data for loan repayments made in Jan, Feb and March 2011(and while I need to check their disbursement, I think many must have been disbursed in 2010, some in early 2011 and some even in 2009 for loans with longer tenure). Now, I may accept your explanation of MFT data being applicable to loans disbursed from Feb 2011 at face value but would like to point out there are no qualifiers (with regard to this) clearly discernible from the MFT website. I may have missed it as well. Also, these loan repayments would have started only in march 2011 and that makes your assertion rather weak… <br /><br />Further, the above assertion by you is also a rather confusing argument - assuming it is true, most MFIs would have almost a very large proportion of their loans having much higher interest rates as they may have been disbursed before Feb 2011 (and many of them in 2010, some in 2011 and some in 2009 for longer term loans). If that is true, then, I would state that, these MFIs are still charging interest rates that are different and higher in a majority of the cases from that published in the MFTY website<br /><br />That said, let me make it clear that the MFT data is just the first step towards transparency and it needs to be validated (by a neutral authority in India) at the field level where there are huge problems of agents, frauds, ghost loans (all in the official financial statements of MFIs) and the like. That is what I wanted and I specifically requested RBI to do so as they are the best positioned to do that. I am sure you and MFT would have no objection towards that. And pending that, and given the happenings in the field that I keep seeing and recording, I would be reluctant to accept your arguments. <br /><br />Finally, two other issues: a) as a policy, it is my job to highlight honestly issues seen in the field and as I have always maintained, I will provide/highlight specific cases only to the RBI, if and when required and requested by them. I am committed to doing that and will provide this data to the regulator if required and if requested by them. This is an open public commitment. Indeed, that is why I am asking them to study the matter…in proper detail; and b) Also, I would like the whole process of collecting the interest data as per the MFT exercise to be transparently described as a step by step process so that people like me can better understand the process<br /><br />Warm Regards<br /><br />RameshRamesh S Arunachalamhttps://www.blogger.com/profile/09264606020720529040noreply@blogger.comtag:blogger.com,1999:blog-7182576430045656062.post-25042944674297617322011-04-28T17:56:42.759+05:302011-04-28T17:56:42.759+05:30hi ramesh, i have been involved in the MFT work in...hi ramesh, i have been involved in the MFT work in India and know that the data put up there is correct. i also get lot of field level information of the interest rates and other charges charged by the MFIs and atleast as far as most of the NBFC-MFIs are concerned i can say that the data in the MFT is correct. please note that the MFT data is the interest rates as being charged by these NBFC-MFIs as on date and not the past rates. <br /><br />hence if you have any information of any NBFC-MFI whose rates displayed on the MFT is wrong vis a vis the information from the field, then please do bring it to our notice and we will study the same. but if you are unable to come back with any specific cases, we would have to assume that the MFT data pertaining to the NBFC-MFIs is accurate. again to re-iterate, the MFT data is the rates charged currently by these NBFC-MFIs and hence pl do not compare it with old loans but only with current loans.<br /><br />i wont be able to comment on non-NBFC MFIs whose data is reflected on the MFT as i am not aware of the same.vasudevanpnhttp://www.equitas.innoreply@blogger.comtag:blogger.com,1999:blog-7182576430045656062.post-28312717425016294572011-04-23T09:54:55.974+05:302011-04-23T09:54:55.974+05:30Dear Chuck
Where can I find the exact steps foll...Dear Chuck <br /><br />Where can I find the exact steps followed in collecting and validating the pricing data from the website. Is there a diagram and/or series of sequential steps with descriptions? I am sorry but kindly guide me to this. Also, would be grateful if you can tell me whether field level validations of reported data were undertaken as there are serious differences between what is stated and intended to be charged and what is actually collected as interest etc. Please visit Mr Al Fernandez's post on the CGAP blog a few weeks ago and he makes the same point as do several others and I have personally seen this on the ground<br /><br />Thanks<br /><br />Warm Regards<br /><br />RameshRamesh S Arunachalamhttps://www.blogger.com/profile/09264606020720529040noreply@blogger.comtag:blogger.com,1999:blog-7182576430045656062.post-37095435500033062452011-04-23T09:02:21.593+05:302011-04-23T09:02:21.593+05:30Dear Chuck
Thanks for this and the data used in ...Dear Chuck <br /><br />Thanks for this and the data used in the post above is from the APMAS study which I have personally also verified in the field and the study was done in later part of 2010 <br /><br />Please note that there is a huge difference from the reported prices to actual prices on the ground and I have video taped the documents and also collection receipts and that is why I am asking RBI to conduct a national study because as the Central Bank in India, they have the wherewithal to do it nationally and say it. <br /><br />The APMAS study is somewhere in later part of 2010 and the RBI orissa study was 2006. I have not used data from the RBI Orissa study as it is outdated. <br /><br />Also, My field level data is just 6 months old and ongoing and I have even video taped the conversations. <br /><br />Let me make it clear that I am not casting any aspersions on your work, In fact, I think that what MF transparency is doing is excellent but let me also tell you that, what is happening on the ground is very different. Make no mistake about that and pricing cannot even be verified in many MFIs that use agents in a big way. <br /><br />Cheers<br /><br />Warm Regards<br /><br />RameshRamesh S Arunachalamhttps://www.blogger.com/profile/09264606020720529040noreply@blogger.comtag:blogger.com,1999:blog-7182576430045656062.post-52540987767049061482011-04-23T08:41:18.017+05:302011-04-23T08:41:18.017+05:3083 MFIs in India have published their current pric...83 MFIs in India have published their current prices at www.mftransparency.org. Thus, we do have current data to study, not just data from five years ago. The data at MFTransparency is also very carefully separated by type of expense, and the prices are systematically calculated for all products of all MFIs based on actual repayments schedules of loans going to real clients. We encourage all to visit our website and review this data, and to read the 60-page analytical report we published on India to learn more about India pricing.<br /><br />Chuck Waterfield<br />CEO, MFTransparency.orgChuck Waterfieldhttp://www.mftransparency.orgnoreply@blogger.com