The Microfinance Institutions Network (MFIN), an association of 39 Indian microlenders, has reportedly approached the government of the Indian state of Andhra Pradesh with a proposal to ease repayment terms for distressed borrowers in return for simplifying government-mandated underwriting procedures. The MFIs are offering to reduce interest rates to 15 percent per year and extend repayment periods to four to five years.
State law enacted in 2010 prohibits MFIs from doing doorstep business and requires MFIs to secure government approval for every loan. The law was enacted following reports of coercive collection practices that resulted in suicides by distressed borrowers. It has been estimated that the law caused microloan collection rates to fall five to 10 percent in Andhra Pradesh.
By Cameron Milani, Research Associate
About Microfinance Institutions Network: The Microfinance Institutions Network (MFIN) is a trade association of 39 Indian microfinance institutions that operate as non-banking finance companies and together reportedly account for approximately 80 percent of the Indian market. MFIN is supported by the Omidyar Network, a US-based philanthropic investment firm, and the International Finance Corporation (IFC), a member of the World Bank Group.
Sources and Additional Resources:
Livemint, “MFIs Likely to Recast Loans for Andhra Borrowers” http://www.livemint.com/2011/09/22004503/MFIs-likely-to-recast-loans-fo….
EconomicTimes, “Microfinance Institutions Want to Recast Andhra Pradesh Loans, Ready to Halve Rates to 15%”http://articles.economictimes.indiatimes.com/2011-10-09/news/30260268_1_…
MicroCapital.org article, November 2, 2010, “MICROCAPITAL BRIEF: Experts Warn that New Legislation in Andhra Pradesh Might Reduce Profitability of Indian Microfinance Institutions” https://www.microcapital.org/microcapital-brief-experts-warn-that-new-leg…
MicroCapital Universe: Microfinance Institutions Network, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Mic…
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