Sa-Dhan Newsletter Volume 5 Issue 1

Operational Costs of Delivering MicroFinance

Sa-Dhan Newsletter

Volume 5, Issue 1 March 2004

Special Issue

Sa-Dhan

Sa-Dhan

The Association of

Operational Costs of

Community Development

Delivering MicroFinance

Finance Institutions

From the Editor's Desk

CONTENTS

1.

Basics

of

Costs

in

Microfinance Operations

Dear Readers,

Dr Sankar Datta explains the

costs that all micro-finance

Providing of financial services to the poor is a complex task - and at the heart

institutions have to account

of this complexity lies the pricing of the service.

for

2.

Operating  Expenses  in

This aspect of micro finance has assumed particular significance in the

MicroFinance:

Indian context with the Tamil Nadu State Prohibition of Charging Exorbitant

Using illustrations from M-

Interest Act No 37 of 2003 now applying to MFIs and hence seriously

CRIL's database, N. Pathak

affecting their work. This has the potential of making the entire sector

elaborates on the crucial role

vulnerable should the ordinance have a snowballing effect.

that  an  organisation's

operating expenses play in its

sustainability

This issue of the newsletter focuses on the issue of pricing of financial

services by the MFIs -- the entire gamut, in fact ,of costs, efficiency and

3.

Taking Interests at Large :

sustainability.

Are we inefficient, asks

V. Prasad, wondering why

Sankar Datta's paper focuses on the first aspect, i.e costs. Costs of micro

MFIs charge high interest

finance delivery which is the basis of pricing and walks us through the three

rates to serve the poor?

elements of costs of an MFI -financial costs, operating costs and costs of

4.  A Tryst With Costs :

Ragini Bajaj Chaudhury looks  loan losses.

at how Banwasi Utthan

Viswanath Prasad talks about the second aspect, i.e efficiency, and takes the

Kendra  maintains  high

challenge head on to ask whether MFIs charge high interest rates because

portfolio quality and low

operating costs ratio

they are inefficient. Of course he leads us on to ways of achieving better

efficiency through a model cost structure.

5.

Sa-Dhan Events

6.

Sa-Dhan's Mission statement

Nilotpal Pathak uses the M-Cril benchmarks to explain further the factors

Edited by :

affecting operating expenses, while Ragini Bajaj Chaudhury focuses on a

Mathew Titus

case study and explains how operating efficiency need not be synonymous

with self sufficiency.

For Private Circulation Only

Published by :

Hope this gives you a perspective on this all important aspect of micro

Sa-Dhan

finance.

12 & 13, 2nd Floor

Special Institutional Area

Happy reading!

Shaheed Jeet Singh Marg,

New Delhi-110 067

E-mail:sa _dhan@mantraonline.com

Mathew Titus

Website : www.sa-dhan.org

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