The document discusses competition in the Indian microfinance sector and its effects. It presents results from a study analyzing loan repayment data from multiple MFIs with over 500,000 client records. The study found that approximately 10% of MFI clients had loans from multiple lenders. Interviews with these clients suggested they borrowed from multiple MFIs primarily to obtain larger loan sizes or as a backup in case of default. While competition benefits customers through lower rates and better service, concerns remain around potential negatives like over-indebtedness and mission drift. The document advocates further research to better understand the impacts of competition.
Since microfinance still concentrated in the South these figures understate true level of competition
Overly aggressive loan tactics – if MFIs compete solely on interest rates, there may be a “race to the bottom” in terms of the tactics used by credit officers to Mission drift – mention that, for example, a strategy of subsidizing the ultra-poor with the better off may no longer be viable
Loan product structure not ideal e.g. if you are a farmer and have two seasons of planting
The audience is probably very familiar Can I say that the partnership model was designed to get around the capital adequacy requirements
Multiple borrowers may provide false / misleading info unlikely as KYC docs required for all partnership model clients, in many cases docs were gathered well after initial sign-up; most managers thought that this was implausible Partnership model clients different from other clients unlikely, based on interviews MFIs, process for designating clients as partnership model seems to be pretty much random (much more info on this in paper)
Estimate of overall incidence of multiple borrowing means % of people who have loans from more than one MFI out of all MFI clients in the states (does not include loans from SHGs)
Mention that MFI staff and other borrowers were not present during interviews Other group members being aware of loan many of the managers we interviewed claimed that field staff were completely aware of multiple borrowing
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