Microfinance institutions (MFIs) in Andhra Pradesh, India, are offering many of their estimated 6.7 million borrowers the option of restructuring their outstanding loans in an effort to defuse recent popular and political hostility towards microfinance in the area.
Borrowers who owe payments of 40 percent or more greater of their total income are eligible for loan restructuring. Under the plan, outstanding loans will be extended from the typical 51 weeks to 75 weeks, which will lower the weekly repayment without any additional interest.
Alok Prasad, head of the Microfinance Institutions Network (MFIN), a trade association of microfinance lenders in India, said member MFIs expect around 30 percent of their borrowers in Andhra Pradesh to opt for restructuring, costing the industry around USD 23 million in lost interest income.
MFIs have also agreed with Andhra Pradesh authorities this weekend to work to gradually reduce the rate of interest they charge to around 24 percent.
By Witt Gatchell, Research Associate
About MFIN:
The Microfinance Institutions Network (MFIN) is a trade association of Indian microfinance lenders. MFIN is presided by Vijay Mahajan, who is also the Chairman of Hyderabad-based BASIX. MFIN consists of 39 Non-Banking Financial Institutions (NBFB) MFIs in India, which reportedly account for more than 80 percent of the Indian market. MFIN is supported by Omidyar Network, a philanthropic investment firm, and the International Finance Corporation (IFC), a member of the World Bank Group.
Sources and Additional Information:
[1] Financial Times: “Indian microlenders offer debt restructuring” By Amy Kazmin http://www.ft.com/cms/s/0/af647c48-df39-11df-bed9-00144feabdc0.html
MicroCapital’s Microfinance Universe profile: MFIN: https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Mic…
Browse the MicroCapital Universe and add your entry to the wiki at: https://www.microcapital.org/microfinanceuniverse/
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