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Microfinance May Close

Microfinance May Close - Microfinance Institutions tabled in the Andhra Pradesh assembly on Friday has upset the Microfinance institutions (MFI) network, who say their concerns have not been addressed and that may force them to shut operations in the state.

"Repayment has fallen drastically and so we are not in a position to continue operations in Andhra Pradesh unless the situation is remedied," said Vijay Mahajan, President, Micro Finance Institutions Network.

Microfinance May Close

The MFIs say the new norms for registration, loan disbursal and collections make it very difficult for them to operate. They point out that in the last six weeks since the Ordinance was promulgated, they have not been able to disburse 12 lakh loans, worth Rs. 1200 crore. And collections have fallen to 20 per cent, so repayment of up to 7400 crore rupees to banks who funded microfinance operations in Andhra Pradesh could be potentially jeopardised.

The political mood in Andhra Pradesh is not in favour of incorporating any of the modifications sought by the microfinance institutions. Top government officials say the ground situation is in fact worse than what they had thought when the Ordinance was promulgated in mid-October. So they feel the provisions for regulation are all necessary and it is up to the MFIs need to work out a sustainable business model.

Microfinance May Close
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