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Expanding Microcredit Outreach to Reach |
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Page 8 of 15
Interest Rate Policy for Wholesale Funds
Experience of PKSF and Grameen Trust tells us very clearly that the wholesale funds can manage donor money for microcredit in the best possible way. They can play a very important role in bringing standardisation and promoting best practices among the microcredit programmes, and act as a pivot linking the informal microcredit programmes with the mainstream financial system through financial intermediation.
For long term sustainability of the NGO microcredit programmes and the wholesale funds the interest rate policy of the wholesale funds, must be carefully designed. Its interest rate should start at near zero for start-up programmes. At the other extreme, wholesale funds must charge market interest to mature programmes. In other words, a wholesale fund should draw a line beyond which it will provide loans only at the market rate. There will be in-between rates for other programmes. The interest rate policy should neither be one-rate-for-all, nor same-rate-for-the-same-organization-for-all-times.
Objective of the policy would be to graduate a microcredit programme from subsidized loans to market rate loans within a reasonable time span. If a microcredit programme feels that it has unlimited access to subsidized loans, it will never take the initiative to prepare itself to operate in a market environment.
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