Risks and Challenges in Micro and Small Enterprises Lending

• by Sandeep Panikkal, Venkat Attaluri and TVS Ravi Kumar
• Feb 26, 2010
• 1 min
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This IFN examines the issues of individual lending and makes recommendations for MFIs considering individual lending.

Many Indian microfinance institutions (MFIs) introduced the individual lending (IL) methodology as a natural progression from the group lending methodology. The lure of “big ticket” loans and higher profitability is attracting growth oriented MFIs to aggressively push for IL without considering the inherent risks. IL has its own idiosyncratic needs like cash flow based lending; analysing business needs and risks; bringing flexibility in product features; building staff capacities and processes that must be followed for successful implementation. This IFN examines these issues and makes recommendations for MFIs considering individual lending.