Microfinance Institutions (MFIs) in the Indian state of West Bengal are facing a shortage of lendable funds, as the banks from which they borrow reduce their exposure to the microfinance sector.
MFIs that rely on loans from banks have been forced to cut loan disbursements by a reported 40 to 50 percent. Banks in the region are avoiding further exposure to the microfinance sector after collections in the state of Andhra Pradesh were temporarily suspended by government decree.
Mr Kuldip Maity, managing director and CEO of Village Financial Services, an MFI based in Kolkata, was quoted as saying, “If the situation continues like this, the entire MFI system will collapse”.
By Witt Gatchell, Research Associate
Sources and Additional Resources:
[1] The Economic Times: “Bengal MFIs make distress call to banks” http://economictimes.indiatimes.com/news/news-by-industry/banking/financ…
MICROCAPITAL BRIEF: India’s Microfinance Industry on Brink of “Collapse” Due to Credit Freeze in State of Andhra Pradesh https://www.microcapital.org/microcapital-brief-indias-microfinance-indus…
MICROCAPITAL BRIEF: Finance Minister of India Vows Not to Strangle Indian Microfinance Industry https://www.microcapital.org/microcapital-brief-finance-minister-of-india…
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