A recent article in US-based newspaper The Washington Post spotlights the impact that the recent liquidity crunch for microlenders in the Indian state of Andhra Pradesh has had on women, who make up a majority of the microborrowers in the state, in particular as a result of a reemergence of unregulated moneylenders. In 2010, the coercive loan recovery practices of some microfinance institutions (MFIs) were brought to light, resulting in encouragement from politicians that borrowers not repay their microloans, thus greatly slowing wholesale funding to the microfinance industry. According to a small business owner, identified as Nabi, interviewed by The Washington Post, new loans have not been available for at least six months, causing women to return to borrowing from moneylenders who have offered loans at annualized interest rates as high as 120 percent.
Vijay Bharati, a woman who created women’s self-help groups in 27 villages commented, “It took us so many years to demonstrate that poor women are creditworthy, but the women who were so regular in repaying for the last 15 years are now waiting for a waiver of their loans. This is damaging our movement.” The Washington Post reports that MFIs across India are now exploring new models such as focusing more on building a relationship with borrowers to help them meet all of their financial needs instead of focusing just on loans. Some have also created complaint systems to promote the fair treatment of borrowers.
By Julie Moksim, Research Associate
Sources and Additional Resources:
Washington Post: “Indian Micro-Credit Crisis Puts Women in a Bind” by Rama Lakshmi, April 26, 2011, http://www.washingtonpost.com/world/indian_micro_credit_crisis_puts_poor_women_in_a_bind/2011/04/21/AFpckbsE_story.html?wprss=rss_homepage
MicroCapital.org Brief, April 9, 2011: Indian Banks Seek Personal Guarantees From Microfinance Institution (MFI) Executives as Condition of Debt Restructuring, https://www.microcapital.org/microcapital-brief-indian-banks-seek-personal-guarantees-from-microfinance-institution-mfi-executives-as-condition-of-debt-restructuring/
MicroCapital.org Brief, December 24, 2010: State Bank of India (SBI) Considers Restructuring Loans to “Non-Performing” Microfinance Institutions (MFIs), https://www.microcapital.org/microfinance-brief-state-bank-of-india-sbi-considers-restructuring-loans-to-?non-performing?-microfinance-institutions-mfis/
MicroCapital.org Brief, November 15, 2010: 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-industry-on-brink-of-collapse-due-to-credit-freeze-in-state-of-andhra-pradesh/
Similar Posts:
- MICROCAPITAL BRIEF: IDB Invest, Oikocredit Subscribing to $20m Bond from CJA to Finance MSMEs in Ecuador, Targeting Underrepresented Groups
- MICROCAPITAL BRIEF: Svasti of India Raises $5m via Impact Investment Exchange (IIX) Women’s Livelihood Bond Issue
- MICROFINANCE PAPER WRAP-UP: “Determinants of Choice of Credit Source Among Clients of Microfinance Systems in the Upper West Region of Ghana,” by Paul Bata Domanban et al
- MICROCAPITAL BRIEF: Soleco, Deetken, IDB Deliver “Women in Solar” Training in Jamaica
- MICROFINANCE PAPER WRAP-UP: “Mind the Gap in Financial Inclusion! Microcredit Institutions Fieldwork in Peru;” by Pilar Lopez-Sancheza, Elena Urquia-Grande
