Does microfinance have a case to answer? Interest rates of 20-30% may seem high but so are recovery and loan-servicing costs in remote villages. According to Mary Ellen Iskenderian of Women's World Banking, a network of MFIs, a more pressing problem is likely to be over-indebtedness, fuelled by rapid growth in a sector with no formal credit bureaus. Big Indian MFIs are now sharing information, pledging not to lend to a person who has already borrowed from three others and to keep total lending to a limit. But smaller lenders have fewer qualms.
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