Budget should bring down the cost of funds to Microfinance sector: Dr. Kuldip Maity, MD & CEO of Village Financial Services (VFS)

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“The role of micro finance industry in financial inclusion and poverty alleviation is well known. Despite the success of MFIs in empowering the rural poor, access to low-cost fund still remains a concern. There is a dire need to bring down the cost of funds to microfinance institutions in order to reduce the cost of loan to rural poor. While MFIs lend without collateral, the fund that they get from the banks or other Financial Institutions comes against collateral. Thus if we see from the perspective of risk cost, MFIs shoulder the entire burden in a delivery that’s meant to benefit the poor.

We would welcome an initiative from this budget to lighten the cost of funds which can then be passed on to the economically weaker sections. This becomes even more important if we consider the projected erratic and deficit monsoon rains that may hit the agri sector – the major playing field for the MFIs.

As far as other areas are concerned, hon’ble finance minister Nirmala Sitharaman has her task cutout amid the rising concern of economic slowdown. We are hopeful the government will take strong measures to ease some of the economic stability constraints such as the fiscal deficit, the current account deficit, retail inflation. The government also needs to revive the NBFC sector which is finding its troubles worsening in the aftermath of IL&FS default. It is important to strengthen the  NBFCs to improve the overall health  of the financial sector”.

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