Delivering Microfinance Services by MFIs:A Study in the State of Assam

There are different types of microfinance institutions (MFIs) functioning in Assam and the operating mechanism of these MFIs differs from organisation to organisation. The players in the Microfinance sector can be classified under three main groups, viz., (a) the SHG-Bank linkage Model accounting for about 58% of the outstanding loan portfolio, (b) Non- Banking Finance Companies accounting for about 34% of the outstanding loan portfolio, and (c) others including trusts, societies, etc., accounting for the balance 8% of the outstanding loan portfolio. Consistent with the need to continue to better understand and find ways and means of improving the situation of microfinance industry, this study is an attempt to understand the microfinance services of the MFIs operating in Assam in terms of twelve parameters. The results of the study indicate that some of the MFIs in Assam are violating the government regulations by collecting deposits from the public. The study concludes that the MFIs of Assam are giving loan to their clients mostly for the income generating purposes while the other purposes like repayment of old debt, health, shop/home improvement are having lower preferences. The study shows that the average processing fees charged by the MFIs of Assam is 1.95% of the total loan amount disbursed to their clients which is higher than the standard fees (1%) as suggested by the Malegam Committee of 2011. Finally, the study concludes that MFIs in Assam are not charging higher rate of interest from their borrowers as it falls within the limit of Malegam Committee recommendations.