Advantages And Disadvantages Of Mfi

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The MFI in India has been facing a lot of challenges in India recently. The challenges faced by MFI’s are listed below:
• The deliver cost of MFI has been unusually very high. So this adds to a lot of pressure on the MFI which is not so among banks. The operating cost is around 7.5% for visiting a client.
• Most of the MFI’s are facing infrastructure issues which lead to a very high initial installation cost.
• The difficulty faced by the MFI’s has been to understand the issues faced by the rural people. So, the credit understanding of the rural people is convoluted.
• The interest rates charged by the MFI’s have been very high as compared to the bank because the MFI’s borrow the funds from the commercial banks. They pay around 12 per cent
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So regulatory authority is important for MFI’s.
• To attract qualified candidates MFI’s can conduct examinations similar to Probationary Officers exam which will be a good strategy considering that the graduate unemployment rate in India is on rise.
• The population is increasing with each passing year; the graduate unemployment will add more pain to the government. So, establishment of MFI’s and expanding the branches will create employment. So, in this prospect MFI’s role is crucial for the economy.
• The interest rates of MFI’s are exorbitantly high and with internet penetrating across rural India there is every possibility that the people will prefer banks for loan.
• The MFI’s are not benefitting much as the banks get the benefits. Recently the Finance Minister announced approximately 1.1 lakh cr. financial assistance to nationalized banks that are having very high NPA’s. However there is no such help for MFI’s. So in future there will be more MFI mergers which can be forecasted from the current
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