The Association of Karnataka Microfinance Institutions (AKMI), a community development organization in the rural Indian state of Karnataka, recently made public the client survey data from “Competition and the Role of External Agents: The 2009 delinquency crisis in southern Karnataka,” a study released in 2010 that was conducted by US-based nonprofit CGAP (Consultative Group to Assist the Poor) and EDA Rural Systems, an India-based research and capacity building organization. The survey was conducted in 2009 in the town of Kolar where a local religious organization banned microfinance institutions (MFIs) from operating, leading to significant defaults in the town after a series of events including “multiple lending, coercive collection practices, not re-financing loans, aggressive growth of the MFIs and non-cooperation with the local religious organization.” The ban is reported to have caused approximately 43 MFIs in the area to lose INR 60 crores (USD 13.4 million).
The key findings of the survey are as follows: (1) 89 percent of the clients surveyed in the “mass default” towns said the loans improved their household condition due to the income-generating activities the loans supported and the lower interest rates compared to other funding sources, while two percent felt that their economic condition has become worse after taking out loans from MFIs; (2) over-indebtedness is perceived differently by various clients with “comfortable borrowing limits” ranging from INR 6,000 (USD 130) to INR 60,000 (USD 1,300); and (3) clients with low financial literacy are more likely to experience “repayment distress.” The survey covered 900 clients from four towns – two “mass default” towns and two towns that did not experience significant defaults.
For background on the survey, you may visit: http://www.cgap.org/gm/document-1.9.52125/Background_on_Kolar_MFI_Customer_Survey_Data.pdf
For the survey data, you may visit: http://www.cgap.org/gm/document-1.9.52123/Karnataka_survey_data_publicvF.pdf
For the full report, you may visit: http://indiamicrofinance.com/wp-content/uploads/2010/08/Karnataka-Microfinance-Report-August-2010.pdf
By Nisha Koul, Research Associate
About Association of Karnataka Microfinance Institutions (AKMI): The Association of Karnataka Microfinance Institutions (AKMI) was founded in 2006 with the goal of promoting community development finance in rural Karnataka and elsewhere in India through dialogue, capacity building and stakeholder engagement. As of 2008, AKMI reported to have 27 members.
About EDA Rural Systems Private Limited (EDA): EDA Rural Systems Private Limited (EDA), established in 1983, is a development sector consultancy, research and capacity building organization. EDA focuses on providing microfinance and livelihood services to the poorest areas of South and Southeast Asia, Central Asia and the Pacific. Financial information on the organization is not available.
About CGAP (Consultative Group to Assist the Poor): CGAP is an independent policy and research center dedicated to providing financial access for the world’s poor. CGAP is supported by approximately thirty development agencies and private foundations. Its mission is to provide market intelligence, to promote standards and to offer advisory services to governments, microfinance providers, donors and investors. CGAP reports having taken in USD 20.9 million in total revenue during fiscal year 2010.
Sources and Additional Resources:
CGAP (Consultative Group to Assist the Poor) Media Release, http://www.cgap.org/p/site/c/template.rc/1.26.16805/
Report, “Competition and the Role of External Agents: The 2009 delinquency crisis in southern Karnataka” by EDA Rural Systems Private Limited, CGAP, http://indiamicrofinance.com/wp-content/uploads/2010/08/Karnataka-Microfinance-Report-August-2010.pdf
MicroCapital.org story, August 17, 2010, “MICROCAPITAL BRIEF: Association of Karnataka Microfinance Institutions, EDA Rural Systems and CGAP Release Report, “Competition and the Role of External Agents: The 2009 delinquency crisis in southern Karnataka,” https://www.microcapital.org/microcapital-brief-association-of-karnataka-microfinance-institutions-eda-rural-systems-and-cgap-release-report-competition-and-the-role-of-external-agents-the-2009-delinquency-crisis-in-souther/
MicroCapital.org story, June 25, 2009, “MICROCAPITAL STORY: Over-Indebtedness And Borrower Delinquency In The Indian State Of Karnataka – A Blogger’s Observations,” https://www.microcapital.org/microcapital-story-over-indebtedness-and-borrower-delinquency-in-the-indian-state-of-karnataka-%E2%80%93-a-blogger%E2%80%99s-observations/
MicroCapital Universe profile: Association of Karnataka Microfinance Institutions (AKMI), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Association+of+Karnataka+Microfinance+Institutions
MicroCapital Universe profile: EDA Rural Systems Private Limited (EDA), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=EdA+Rural+Systems+Pvt+Ltd
MicroCapital Universe profile: CGAP (Consultative Group to Assist the Poor), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=CGAP+%28Consultative+Group+to+Assist+the+Poor%29
Browse the MicroCapital Universe and add your entry to the wiki at: https://www.microcapital.org/microfinanceuniverse/
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