What will be the impact of interest spread cap of 7% in the profitability of micro finance institutions?
- ShareSansar, July 17, 2016 on Experts Speak , Featured , Latest
Through monetary policy Nepal Rastra Bank informed that the spread rate of of micro finance to be limited to 7%. Here is the opinion of our expert regarding the same.
Dharma Raj Pandey
CEO, Nepal Grameen Bikas Bank Limited
It will have a huge impact on the profitability of Microfinance companies. Nepal Micro finance Bankers Association has also requested Nepal Rastra Bank to rethink about such limit in interest spread.
We need to reach people in remote areas. So we have bigger borrowing cost, lending costs and staff cost. Our administrative cost is high. I spread rate is limited to 7%, then it will adversely affect the operation of many micro finance companies of Nepal.
Nepal Rastra Bank plans to provide financial access in remote areas of Nepal. With a spread rate of 7% it will be difficult to provide financial access to the people of remote areas.
Gokarna Bahadur Chetri Karki
Director, Janautthan Samudayic Laghubitta Bikas Bank
It will definitely affect the profitability of micro finance companies. Most of the micro finance provides loan without collateral. Having such less interest spread will be very risky for micro finance companies.
At present only 2-3 micro finance companies have interest spread of 24-30%, most of the micro finance have an interest spread of 15% to 20%.If the interest spread of 7% excludes cost of fund than it is fine else it will be very problematic for micro finance to operate.