The Microfinance customers, mainly belonging to poor low income households, have to pay extremely high interest rates, ranging from 24 to 30% in most cases, on their loans. At the same time, the corporate loans are priced at less than half of it. How can state interventions help address this malady?

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Direct Cost to Each Borrower:

  1. The quicker the customer needs it the more costly its going to be, same for deals that stretch the process – the time customer connects with lender till the time the customer gets the loan – for example mortgage, bigger deals, longer time, more cost of verifications etc.
  2. Mobile connectivity and a transaction system on mobile where lender is connected to borrower reduces cost.
  3. having a good call center to handle the customer outreach brings cost down.

Lenders (specially if its a bank) Service costs:

  1. Cost of servicing regulations
  2. Cost of customer outreach and OTC (over the counter) service
  3. Cost of operations
  4. Costs of expensive brand image and executive expenses (salaries and perks to commensurate higher execs. which ultimately customers pay for).


Spend the Marketing dollar back into the customer base and grow through refferal value.

Stop following big banks and what they do, define your own character with customer need and the costs will automatically become bearable with the borrowers capacity. Its an ideological shift – note Grameen (before they became international).

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