Under pressure from social as well as political forces, a sizeable number of microfinance institutions (MFIs) in the country have agreed to reduce interest rates by 2-3 per cent range by March 2011, officials from Sa-Dhan, an over 200-member industry association said on Tuesday.

Generally, interest rates by MFIs vary between 18-36 per cent.

Speaking to Financial Chronicle after the firm’s 12th annual general body meeting, Mathew Titus, executive director of Sa-Dhan said, “We have explicitly told members to reduce interest rates. Although an industry-wide figure has not been decided, we expect members to reduce rates by 2-3 per cent.”

This will be done by keeping all the other things constant and will be achieved by operational efficiencies, Titus said.

“We are worried that some MFIs are over-charging poor borrowers. Interest rates will move southwards for sure. We have also taken directed members to cut down salaries of their top executives,” he added.

Figures for MFI industry show that the industry reported 52 per cent growth in its total loan portfolio in the 12 months ending March 2010 at Rs 18,344 crore as compared to Rs 12,000 crore at the end of 2010.

Figures for profitability were not disclosed by the company.

“The number of clients from Southern region as a percentage of total MFI clients across the country has fallen to 56 per cent in March 2010 as compared to 70 per cent in 2009,” Amiya Sharma, co-chair of Sa-Dhan, said.