Microfinance Focus, September 15, 2011: Formed as a joint venture between the Government of Andhra Pradesh and the Mandal Mahila Samkhyas (MMS) of self-help groups, a new microfinance bank ‘Stree Nidhi' will start lending to poor women at 13 percent interest rate from today, reports The Hindu Business Line.

“The operations of ‘Stree Nidhi' will be handled completely with the aid of technology. Mobile banking-based transactions hold the key'' said, Mr Reddy Subrahmanyam, Principal Secretary, Department of Rural Development, Government of Andhra Pradesh, told Business Line here.

The bank will start out with four types of loans including funds to meet business requirements, education and health. Borrowers will get to access micro credit within 48 hours after applying for a loan.

In order to make the loans cheaper, the administrative costs would be limited to 10 per cent of the net return. The average size of loan is Rs 15,000 with a duration of one year in monthly repayment mode.

The members of MMS, who are actually from among the same SHG community would do the due diligence and asses the need and repaying capacity before sanctioning the loans.

``They will be given a one per cent commission to do the due diligence, Including this and other costs, it is very much viable to extend loans at 13 per cent interest,'' Mr Subramnayam said. The prompt repayment will make a big difference. If the repayments are on track, the borrowers will be eligible for a nominal three per cent interest on subsequent loans, he added.

The initial authorised capital is Rs 500 crore. “In the current financial year, Rs 1000 crore funds would be mobilised which will be increased to Rs 4,000 crore by 2014,'' the official said.

“The MFIs in the State would have to compete with us at low interest rates,'' Mr Subrahmanayam said.