Microfinance for SHG to boost housing credit in rural areas: IFMR report

According to a research report by Centre for Micro Finance and Institute for Financial and Management Research (IFMR), microfinance is still in its nascent stages in India. While most institutions will readily provide microfinance for business needs, most institutions are still reluctant to provide housing loans. 

The latest initiative toward spreading housing micro-credit has been made by the National Housing Board (NHB) with its tie-up with Chennai based micro-finance institution, Repco Foundation for Micro Credit.

This initiative will give a boost to the housing credit in the rural areas of India. According to a report by National Housing Board (NHB), despite refinance support to primary lending institutions, the housing credit in rural areas has remained stagnant at 10% of the total bank credit during the last few years.

Estimates indicate that even by 2020, 60% of India's population will be in the rural areas, despite increasing trends towards urbanisation.

IFMR’s report also talks of the challenges in providing housing microfinance; the most important ones being funding sources and security linkages. The basic issue is complicated land titles and collateral issues. Also, the lending methodology is completely different and the loan repayment period is much longer than the normal loan period.