Institute of Rural Management,

Anand
presents

UDAAN’11
High spirits we have, gravity we flout!

DRISHTIKONE- CASE STUDY

To infuse new viewpoints and practices in nation building and development, UDAAN organizes a case study
contest, DRISHTIKONE, to engage the bright young minds from institutes across the country. This year, the
event is going to be held online, and the participants are required to write their analysis on the subject and
send it back to the mentioned email address, after which it would be judged by eminent personalities of
the Micro-Finance sector. The ‘Off-Site’ event would make the winner richer by Rupees Twenty Thousand.

Following is a brief account of the Problem Statement, for which the analysis is sought.

Making Micro-Finance interest rates affordable: A Way Forward?

The Malegaon Committee calls ‘unjustified high rates of interest’ as one of the specific areas of concern of
MFIs in the Indian context. It accepts that ‘there is universal agreement that the pricing of interest charges
and other terms and conditions should be affordable to clients and at the same time sustainable for MFIs.’
It recognizes the ‘difficulty in maintaining a balance between the two’ yet says that ‘given the vulnerable
nature of the borrowers, it becomes necessary to impose some form of interest rate control to prevent
exploitation.’

Usurious interest rate or the allegation of it is not new to MFI. Even in 2006, it was identified as an issue,
when district authorities closed down about 50 branches of two major MFIs in Krishna district (Andhra
Pradesh). Action was taken following complaints of “usurious interest rate” and “forced loan recovery”
practices.

Therefore, one can see interest rate continues to remain the bone of contention. The Malegaon
Committee’s recommendation has received varied responses, especially on the recommendation of
capping interest rate at 24% on individual loans and a margin cap of 10-12% depending on the size of the
MFI.

Is capping the interest rate a solution in the current liberalized interest rate regime of RBI? What are the
alternate ways by which interest rate can be made more affordable? Is interest-free* lending an option and
if so, how can it put into operation? How does one look at Islamic finance, is it an option?

The case-study invites you to delve into ways and means to resolve the interest-rate issue & make it more
affordable. The means could be financial, social, or otherwise. How does one ensure it is followed by micro-
finance institutions? What will be institutional or legal mechanism for ensuring compliance?

*Interest-free lending recommended by committee chaired by Dr. Raghuram Rajan in 2008

 Institute of Rural Management,
Anand
presents

UDAAN’11
High spirits we have, gravity we flout!

Submission Guidelines

1. Participants are expected to send an Executive Summary first and a detailed Case later. Executive
summary should not exceed one page.
2. Each team can consist of maximum two members. Single member plans are also welcome to
participate.
3. Participation is open to all: B-school students, non students, have-been students and will be
students.
4. Soft Copies of the Executive Summary have to be sent to drishtikone.udaan.irma@gmail.com by
11th February, 2011 with the following in the subject line
<case>_<team_name> e.g. case_Team Alpha
5. Similarly, the entry file name should be <case>_<team_name>

Each entry should have a cover page mentioning the following

a. Team Name
b. Name of Team Leader
c. Team Leader’s Email ID and Telephone Number
d. Name of other Team Members.
Do not mention any of the above information in any other part of the entry.
6. Entries are required to be submitted in Word/Pdf format, 1.5 line spacing and font Times New
Roman size 12. Margins should be 1inch or 2.5cms on all sides
7. A participant can be a member of only one participating entry.
8. Only original work should be submitted. Plagiarism will lead to disqualification from the event.

Event Important Dates

1. Last date of submission of Executive Summary: 11th February, 2011

2. Results of short listed teams: 14th February, 2011
3. Last date of submission of detailed B-Plan: 23rd February, 2011
4. Final Result 26th February, 2011
 Institute of Rural Management,
Anand
presents

UDAAN’11
High spirits we have, gravity we flout!

Criteria of evaluation:

Innovative idea: 40%

Viability: 25%
Scalability: 15%
Sustainability: 20%

For further details, contact

Sumit Jalan : +91 9601266528

E – mail id : drishtikone.udaan.irma@gmail.com