There is story from hyderabad how MFIs are swindling poor farmers money. According to Mumbai Mirror, a few of them have been closed for exorbitan interest charges - 35% compared to 15% commercial rate.

Read more here:
http://www.mumbaimirror.com/nmirror/mmpaper.asp?sectid=4&articleid=32820062054149373282006205412109

As many people realise they can charge high interest rates, this will attract more players and hopefully increase the competition for customers thus lowering the rates.

From my economics 101, 35% is more than double the commercial rate and put simply, the net effect is overcharging for the services even though the argument that is often advanced in favour of high interest rates is that the poor are better of with 35% than with no money at all. Well, is it the same as 1/2 a loaf is better than none?