Micro Units Development & Refinance Agency Limited (MUDRA), launched by the Union Government for financing micro entrepreneurs engaged in small business activities, has sanctioned a refinance line of Rs. 100 crore at 10 per cent interest per annum to SKS Microfinance Limited (SKS).
This is the first refinance limit sanctioned to SKS, the only listed micro finance company in the country, by MUDRA. The development is expected to contribute to bringing down the cost of interest-bearing liabilities at SKS.
Earlier, with the cost of its interest-bearing liabilities dropping to 11.9 per cent in Q1-FY16 from 13.6 per cent in FY14 on account of downward adjustments in risk premium, SKS stated that it could reduce the interest rate charged from borrowers on three occasions since October 2014.
With an overall reduction of 3.8 per cent since October 2014, SKS charges 20.75 per cent on all its disbursements with effect from October 1, 2015.
“I am happy that SKS Microfinance Limited, which is availing of its first refinance limit from MUDRA, will make use of the same in bringing down its cost of micro loans to the bottom of the pyramid for their comprehensive economic and social development. Pursuing our vision of being an integrated financial and support services provider for the bottom of the pyramid universe for their comprehensive economic and social development, we have extended a refinance line of Rs. 100 crore to SKS Microfinance Limited, and are confident that the company will strive harder to bring about greater gains for its borrowers at the grassroots”, Mr. Jiji Mammen, Chief Executive Officer of MUDRA, said in a press release on Wednesday.
“At a rate of 10 per cent, this is lower than regular term loans from conventional lenders, and reinforces our assertion in the recent past that the Non Banking Financial Company – Micro Finance Institution (NBFC-MFI) structure does not preclude us from availing dedicated refinance lines at a lower rate of interest. We are already the lowest cost lender in the MFI segment, and will pass on this benefit to our microfinance borrowers at an appropriate juncture”, said Mr. S. Dilli Raj, president of SKS.
MUDRA is a new financial institution announced by the Finance Minister Arun Jaitley while presenting the Union Budget for FY 2016.
The purpose of MUDRA is to provide funding to non-corporate small business sector which is mostly outside the formal credit system.
