The microfinance industry served millions
of poor in rural areas providing them small loans to earn their livelihood, but
AP govt brought an ordinance in 2010 and it brought the industry to its knees.
Its impact not only killed the industry in Andhra Pradesh but also had its
impact felt across the MFI in India. As per a report by “M-CRIL Microfinance
Review 2012: MFIs in a Regulated Environment” M-CRIL comes up with the
financial and social analysis of this whole issue.
As people stopped making payments whole Microfinance industry came to a standing halt, the sentiment that people had was that the govt will not allow the industry to work anymore therefore no need to make payments, this problem was also abetted by political parties who asked people not to make payments anymore to MFI’s anymore.
From 62%
per annum growth in terms of numbers of unique clients and 88% per annum in
terms of portfolio over the five years 2005‐2010 – and around 32 million
borrower accounts around October 2010, India was the largest MFI sector in the world.
This number reduced and the number of effective clients served reduced by 35%
by the end of year 2011 to 21 million account.
From a PAR of 0.67 in 2010 the PAR has increased
to 29.5 % in the state of Andhra Pradesh, this makes it extremely risky
portfolio which will act as a deterrent to any institutional lending to the
sector. Operating
efficiency has been adversely affected as portfolio management issues and
client protection compliance expenses have increased OER. Cost per borrower has
risen sharply as MFIs first pursued growth at all costs and now have to put
considerable effort into client protection measures and follow up of repayments
As industry comes to a halt the ones who are most severely
affected are the women in rural AP. The relation between women and MFI can be
understood from the fact that the overwhelming majority (98%) of Grameen Bank in Bangladesh borrowers are women and similar is the
case in India
All
microfinance stakeholders, whether within or outside Andhra Pradesh now await
the passage of
“The
Micro Finance Institutions (Development and Regulation) Bill, 2012” tabled in the
national Parliament on 29 May 2012. However the bill is stuck in parliament and
with the central govt unable to come out of the firefighting mode due to spate
of corruption scams by its ministers and therefore has been unable to get this
bill passed.
In
the meantime, the Government of Andhra Pradesh continues to challenge the
constitutional validity of the bill on the grounds that in the Indian
Constitution this despite the same party ruling at both center and the state.
And if such a thing does happen it will be the end of road for the MFI in AP
and those who will suffer will be millions of poor who will be denied a chance
to earn their livelihood by their own efforts.
By: Saurabh Sinha
Twitter: @saurabhsinha10Email Id : saurabhsinha10@gmail.com
Mobile: 8008299172
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