Crisis looms over south’s microfinance sector
KOLKATA: Trouble for the Rs 57,000-crore microfinance sector is brewing again with drought-hit Karnataka, the largest MFI market with about 14% share, emerging as the new stress point with non-payment of dues.
There are repayment concerns also in some smaller pockets of Tamil Nadu, two persons familiar with the development said. As many as 20 NBFC-MFIs, including all the large ones, operate in Karnataka, which is otherwise a mature market for microfinance activity. “Fresh challenges have emerged in Karnataka and parts of Tamil Nadu," analytical form Crisil said in a recent report.
Ratna Vishwanathan, chief executive of Microfinance Institutions Network (MFIN), the self-regulator for NBFC-MFIs, agreed, saying the drought in North Karnataka has impacted loan repayment capacity of women borrowers. Although MFIs don't give farm loans, consecutive droughts have affected the repayment capacity at the household level.
The government has released Rs 1,712 crore and Rs 1,236 crore for Tamil Nadu and Karnataka from its disaster management fund as farmers from both states was seeking relief, battered by the consecutive droughts.
“There is crisis in some pockets, especially in North Karnataka, where political interference has also created trouble for the sector,“ said Rajeev Yadav, chief executive of Fincare-Disha, which has 40% of its portfolio in Karnataka. The collection challenges in recent months were fuelled by news of loan waivers and originator-specific issues.Collection ratios in January 2017 have rebounded, ranging from 60% to 95% for different states and remaining below pre-demonetisation levels of 99%, Crisil said.
This added to the problems of the sector, which is characterised by its fragile ecosystem, as it continues to suffer from demonetisation-led non-repayment till date and local level political interferences in several pockets of Maharashtra and Madhya Pradesh.
“There's no point expecting small borrowers to clear all their past dues immediately .We need to support these borrowers. It will take another four-to-six months to attain normalcy ,“ said Udaya Kumar, managing director of Grameen Koota.He said many defaults were reported in Bengaluru city and in urban pockets.
There are repayment concerns also in some smaller pockets of Tamil Nadu, two persons familiar with the development said. As many as 20 NBFC-MFIs, including all the large ones, operate in Karnataka, which is otherwise a mature market for microfinance activity. “Fresh challenges have emerged in Karnataka and parts of Tamil Nadu," analytical form Crisil said in a recent report.
Ratna Vishwanathan, chief executive of Microfinance Institutions Network (MFIN), the self-regulator for NBFC-MFIs, agreed, saying the drought in North Karnataka has impacted loan repayment capacity of women borrowers. Although MFIs don't give farm loans, consecutive droughts have affected the repayment capacity at the household level.
The government has released Rs 1,712 crore and Rs 1,236 crore for Tamil Nadu and Karnataka from its disaster management fund as farmers from both states was seeking relief, battered by the consecutive droughts.
“There is crisis in some pockets, especially in North Karnataka, where political interference has also created trouble for the sector,“ said Rajeev Yadav, chief executive of Fincare-Disha, which has 40% of its portfolio in Karnataka. The collection challenges in recent months were fuelled by news of loan waivers and originator-specific issues.Collection ratios in January 2017 have rebounded, ranging from 60% to 95% for different states and remaining below pre-demonetisation levels of 99%, Crisil said.
This added to the problems of the sector, which is characterised by its fragile ecosystem, as it continues to suffer from demonetisation-led non-repayment till date and local level political interferences in several pockets of Maharashtra and Madhya Pradesh.
“There's no point expecting small borrowers to clear all their past dues immediately .We need to support these borrowers. It will take another four-to-six months to attain normalcy ,“ said Udaya Kumar, managing director of Grameen Koota.He said many defaults were reported in Bengaluru city and in urban pockets.
