Posted on November 26, 2009 - by boris

India: Microfinance institutions wary of housing loans over default fears…

Concerns of defaults are holding back microfinance institutions, or MFIs, from a full-fledged expansion into home loans even as they seek to turn their clientele of poor borrowers into consumers and compete with commercial banks.

MFIs, established mainly to lend small sums to the unbanked poor to help them earn a living, say there’s potentially a huge demand for home loans among their customers. “This is unsecured lending. Risks are too many,” said a senior official at SKS Microfinance Ltd, India’s largest MFI, who didn’t want to be named. “It’s a different and a difficult ball game. We do not know yet how to price it.”

Home loans would be an extension of the consumer finance business of MFIs, who have already gone beyond their traditional role by financing the purchase of mobile phones, water purifiers and even refrigerators and are seeking to expand their product offerings to compete with commercial lenders.

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Source: http://www.livemint.com/2009/11/23212808/MFIs-wary-of-housing-loans-ove.html