Microfinance institutions (MFIs) in the Indian state of Andhra Pradesh reportedly are continuing to have difficulty repaying wholesale bank loans even after the restructuring of some of those loans after the downturn in microfinance that began in the region in 2010. In response to harsh collections practices, the government of Andhra Pradesh enacted legislation that limited the capacity of MFIs to issue and recover loans. Subsequently, a reported 30 percent of borrowers defaulted on their loans. During 2011 and 2012, Banks recast the loans of seven MFIs that reportedly amount to a total of cumulated INR 58 billion (USD 1.1 billion). The MFIs were given repayment moratoriums varying from one to two years in length. Alok Prasad, CEO of India’s 46-member Micro Finance Institutions Network (MFIN), was quoted as saying, “In Andhra Pradesh, given the fact the state law is still there, the ground situation remains unchanged since October 2010. The outstanding loan portfolios of microfinance firms are still unpaid. A large part of these portfolios had to be written off because of new regulations. As a result, many microfinance companies now have negative net worth.”
The final hearing of a petition against the legislation of the state government was held in the Andhra Pradesh High Court in November 2012, though a judgment is still pending. “The survival of MFIs depends on this judgment. We are eagerly awaiting the court’s decision,” Kishore Kumar Puli, CEO of Trident Microfin, one of the MFIs that holds restructured bank loans, reportedly said.
By Nicole Boyd, Research Associate
About Microfinance Institutions Network (MFIN)
The Microfinance Institutions Network (MFIN) is a trade association of 46 Indian microlenders 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.
About Trident Microfin Private Limited
Trident Microfin Private Limited (formerly Annapurna Financial Services Private Limited) is a microfinance institution that was established in 2007 and is headquartered in Hyderabad, Andhra Pradesh, India. The goal of the company is to provide comprehensive financial and business solutions to enterprises and low-income individuals, particularly women and microenterprises, in a socially, economically and environmentally sustainable manner. As of September 30, 2012, Trident Microfin reported total assets of USD 29.2 million, a gross loan portfolio of USD 21.1 million and 220,000 active borrowers.
Sources and Additional Resources:
Business Standard. “MFIs struggle to repay restructured loans,” http://www.business-standard.com/article/finance/mfis-struggle-to-repay-restructured-loans-113020701294_1.html
MicroCapital. March 27, 2012, “MICROCAPITAL BRIEF: 9.2m Microfinance Borrowers in India Have Defaulted Since 2010,” https://www.microcapital.org/microcapital-brief-9-2m-microfinance-borrowers-in-india-have-defaulted-since-2010/
MicroCapital. August 9, 2011, “MICROCAPITAL BRIEF: Industry Players Say Indian Microfinance Institutions Should Not be Crushed Even Though “Some MFIs Have Gone on the Wrong Path”,” https://www.microcapital.org/microcapital-brief-industry-players-say-indian-microfinance-institutions-should-not-be-crushed-even-though-“some-mfis-have-gone-on-the-wrong-path”/
MicroCapital. June 6, 2011, “MICROCAPITAL BRIEF: Reserve Bank of India (RBI) Mandates Personal Guarantees from Promoters of Microfinance Institutions (MFI) Looking to Restructure Debt,” https://www.microcapital.org/microcapital-brief-reserve-bank-of-india-rbi-mandates-personal-guarantees-from-promoters-of-microfinance-institutions-mfi-looking-to-restructure-debt/
MicroCapital. “MICROCAPITAL BRIEF: Federal Microfinance Bill May Replace Existing State Microfinance Legislation in India,” https://www.microcapital.org/microcapital-brief-federal-microfinance-bill-may-replace-existing-state-microfinance-legislation-in-india/
MicroCapital Universe Profile: Microfinance Institutions Network (MFIN) https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Microfinance+Institutions+Network+%28MFIN%29
MicroCapital Universe Profile: Trident Microfin Private Limited https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Trident+Microfin+Private+Limited
Do you know that MicroCapital publishes the MicroCapital Monitor newspaper each month? Find out more at https://www.microcapital.org/products-page/
Similar Posts:
- MICROCAPITAL BRIEF: Light Microfinance, IppoPay Partner to Offer Digital Lending to MSMEs in Rural India
- MICROFINANCE PAPER WRAP-UP: “Microfinance in India: Issues, Challenges and Opportunities;” by Mohammad Abu Saleh, Zubair Ahmad
- MICROCAPITAL BRIEF: Network International Unveils “Networkpay” Tools for SMEs in Egypt to Accept Digital Payments
- SPECIAL REPORT: Partner with Agents for Impact, and We’ll Drive Impact Together!
- MICROCAPITAL BRIEF: Jeff Flowers to Lead FINCA Impact Finance
