8 m Andhra borrowers ineligible for MFI loans
Alok Prasad, CEO of industry body Micro Finance Institutions Network (MFIN), said the credit record of these borrowers in Andhra Pradesh (AP) has turned negative on account of the repayments coming to a halt. This was post the promulgation of the AP Ordinance of October 2010, regulating the activities of MFIs in that state.
Prasad added that since June 2012, MFIN members — constituting over 90 % of the microfinance industry — have been using bureau reports for all their lending decisions.
AP constituted around 30% of the micro-lending industry before AP MFI Ordinance, which is now an Act, was put in place by the state government. This was done under the pretext of clamping down on microlenders after a spate of borrower suicides due to alleged strong arm tactics of MFIs.
MFIs on their part say that that this move was politically motivated and is benefiting traditional moneylenders who charge small borrowers unfair loan terms. The repayment rate of MFI loans in AP dropped to about 10% now
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