The DUP Partnership Case: Differential Pricing for Partners

This paper, prepared for academic discussion by the Microfinance Group at the Indian Institute of Management Bangalore, presents the case study of Bala Mitra (BM), a partner NGO of Daskshin Microfinance Services –Urban Programme (DUP).

BM, an NGO focussing on community issues, was among DUP's first partner NGOs. DUP considered BM a professional agency with a clear mandate for development, and it remained DUP's largest partner until 2003 after which the following issues began to surface:

• Number of BM groups linked with DUP and their credit off-take declined;
• BM figured prominently in the No Current Lending list;
• BM wanted lower interest rates from DUP, and developed linkages with local commercial banks for SHG loans.

During a discussion between DUP and BM to resolve differences, BM requested a cut in DUP's training costs in order to be able to lend at 18 percent interest instead of the usual 24 percent. In this context, this paper throws open the issue of differential interest rates for debate.